Statistical Analysis of the Federal Government’s Expenditure and Revenue (A Case Study of National Bureau of Statistics, Kaduna State From 2003 – 2008)
Chapter One
OBJECTIVES OF THE STUDY
- To have an insight into the amount of revenue generated and expenditure for the period of 2000-2011
- To show the relationship between revenue and expenditure using correlation analysis
- To determine the degree of the occurrence between expenditure and revenue using correlation analysis.
- To forecast future revenue and expenditure using time series analysis
- To make necessary recommendations on the analysis
CHAPTER TWO
INTRODUCTION
Revenue and expenditure of my country falls under the topic; “public finance”.
Revenue is an inflow of resources or money into the government sector from other economic units / sectors. It includes all non-payable receipts and grants. Revenue is divided into recurrent and capital. Recurrent revenue comprises tax receipts and non-receipts within the fiscal year, while capital revenue covers receipts from non-financial assets used in production for more than one year.
Expenditure is an outflow of resources from government to other sectors of the economy, whether requited and unrequited. It is divided into recurrent and capital expenditure. Recurrent expenditure is payments for non-payable transaction within one year; while capital expenditure is payments for non-financial assets used in production for more than one year.
NIGERIAN ECONOMY AND OIL BOOM
By the time Nigeria became politically independent in 1960, agriculture is the dominant sector of the economy contributing about 70% of the GDP, employing about the same percentage of the working population, and accounting for about 90% of foreign earnings and federal government’s revenue. The early period of post-independence up until mid-1970’s saw a rapid growth of industrial capital and output, as the contribution of the manufacturing sector to the GDP rose from 4.8% to 8.2%. This pattern changes when oil suddenly became of strategic important to the world’s economy through its supply price nexus (Adedipe 2004).
The challenges confronting the Nigeria economy in the 21st century are diverse and enormous. The unacceptable state of Nigeria’s economy is most galling given Nigeria’s enormous endowments of natural and human resources. This is more so given the fact that Asian countries, such as Singapore and Malaysia, with similar colonial heritage and attributes attendant thereto, and similar natural resource endowments, have recorded significant successes in the development of their economies since 1965 when they were per or even behind Nigeria.
Singapore, some 30 years later had a per capita income of some US$10,000; whilst that of Nigeria was US$300. Nigeria’s economic decline, especially during the last 20 years is illustrated by the fact that per capita income, which was US$1000 in 1965 had declined to US$300 by 1998 within some 18 years, Nigeria had declined from being a low middle income country and amongst the fifty richest countries on the world to one of the 30 poorest.
The major causes of the decline in Nigeria’s economic fortunes have been political instability and bad governance, most especially in the 1990s. Military rule in Nigeria, as has been the case in most other countries with prolonged military rule, led to economic and social stagnation and decline.
CHAPTER THREE
METHODOLOGY
INTRODUCTION
Data collection is the process of gathering information for the purpose of investigation or inquires. Most often the information we need for such investigation are not readily available either because they are not documented or are scattered in various documents.
Data collection is a very important stage in every statistical investigation, infact, the method employed in the collection of data determines to a large extend the source of the enquiry.
There are two sources of data collection we have primary and secondary sources and also two types of data which are primary and secondary data. The type of data are used in this research is the secondary data.
Data is said to be obtained from primary source if it represents the raw material of an investigation. Such data are the most original and authentic data that is not obtained from primary source are said to be obtained from secondary source, they are not original or material which has undergone some sort of statistical treatment, at least once for a certain purpose. Data collected from primary and secondary sources are referred to as primary and secondary data respectively.
METHODS OF DATA COLLECTION
There are many techniques or methods of data collection. The most important among these are discussed as follows:
Interview method: By this method, data are collected from the informants by trained agents called enumerators. These agents visit the informants in their houses or offices, in the markets or on the streets as the case may be, asked the necessary questions and enter the replies in special blank called schedule. This method has some advantage and disadvantages as follows:
CHAPTER FOUR
RESULTS
Correlation Analysis
Correlation analysis was conducted on the data to establish the degree of association connecting the variables. It was found that all the variables are positively associated by 99 % except for COP which had a low correlation value of about 30 % with the other variables. The correlation matrix result is presented in Table 2.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
INTRODUCTION
In this chapter, summary, conclusion and recommendation are discussed.
Conclusion
The paper examines the revenue-spending hypothesis for Nigeria using macro data from 1970 to 2011. Correlation analysis, granger causality test, regression analysis, lag regression model, vector error correction model and impulse response analysis were the techniques used for analysis. The paper found that revenue and expenditure are highly correlated and that causality runs from revenue to expenditure in Nigeria. The vector error correction model also confirms that there is a significant long run relationship between revenue and expenditure implying that disequilibrium in expenditure can be corrected in the long run through policies that adjust oil and non-oil sector revenues. The lagged regression model showed that the positive relationship between revenue and expenditure reverts to negative at lag five thereby justifying the need for the use of medium term expenditure framework to monitor expenditure patterns in the short to medium term. The paper concludes that short term shocks from crude oil price passes through oil revenue to affect expenditure. This has led to swings in public expenditure pattern with sustained increase of recurrent expenditure over capital that has consequences for economic growth. However, there are some areas for further studies. There would be need to test for structural breaks over the period studied to support the conclusions obtained from the impulse response shocks. There would also be need to carry out a cross country study for the correlation between government expenditures and revenues for oil-exporting countries in other to provide cross country evidence on the relationship between public expenditure and revenue
RECOMMENDATION
The new democratic government has already demonstrated its political will on working to rebuilt Nigerian economy the following recommendations will help in achieving its objectives:
- Education is once more a priority in its broad national development strategy. The work done thus far would, benefit greatly from internal and external support by foundations, business, noas and international development agencies to ensure that the goals set are realistic, meet the needs of a new democracy and are economically sound.
- Alleviate poverty by fostering opportunities for job creation
- Achieve high economic growth through better mobilization and prudent use of economic resources
- The economy needs expansionary policies to stimulate economic growth and generate new jobs.
REFERENCES
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- Mehmood, R., & S. Sadiq. (2010). The Relationship between Government Expenditure and Poverty: A Cointegration Analysis. Romanian Journal of Fiscal Policy, 1(1), 29-37.
- Mehrara, M, M. Pahlavani, & Y. Elyasi. (2011). Government Revenue and Government Expenditure Nexus in Asian Countries: Panel Cointegration and Causality. International Journal of Business and Social Science, 2(7), 199-207. http://dx.doi.org/10.2139/ssrn.1977987
- NCEMA. (2004). Structural Adjustment Programme in Nigeria: Causes, Processes, and Outcomes. National Centre for Economic Management & Administration. A publication of National Centre for Economic Management & Administration (NCEMA), for Global Development Network. Accessed online on the 23rd July 2012 from http://depot.gdnet.org/cms/grp/general/Nigeria_proposal.pdf
- Obioma, E. C., & U. M. Ozughalu. (2010). An Examination of the Relationship between Government Revenue and Government Expenditure in Nigeria: Cointegration and Causality Approach. Central Bank of Nigeria Economic and Financial Review, 48(2), 35-57.
- Stoian, A. (2008). Analyzing Causality between Romania’s Public Budget Expenditures and Revenues. Theoretical and Applied Economics, 11(11), 60-64.
