Project Abstract

<p> The study investigates the impact of government expenditure on<br>economic growth of Nigeria from the period 1980-2011. The<br>objective was set to address the problem of utilization of revenue<br>targeted to improving the economic condition of Nigeria. The review<br>of theoretical and empirical literature provided a basis for the<br>selection and specification of model which was used to show if<br>government capital and recurrent expenditure has positive or<br>negative impact on economic growth. The data were got from CBN<br>statistical bulletin. To proper solution to the problem, policies were<br>recommended to tackle the setbacks to economic growth. <br></p>

Project Overview

<p> </p><p>1.1 BACKGROUND OF THE STUDY<br>In all most all economics today government intervention in<br>undertaking fundamental roles of allocation, stabilization,<br>distribution and regulation, especially where or when market proves<br>inefficient or its outcome is socially unacceptable. Government also<br>intervenes, particularly in developing economics to achieve<br>macroeconomics objective such as economic growth and<br>development, full employment, price stability and poverty<br>reduction.(AESS PUBLICATION 2011).<br>Public finance is to provide information to all arms of<br>government in other to provide use full data as done for the develop<br>nations that transferred public finance technology to developing<br>nation. Public finance is used for allocation, stabilization and<br>distribution (Musgrave and Musgrave 1989).<br>Public finance is the study of the principle underlying the<br>spending and raising of funds by public authorities (shirras, 1969).<br>It is the field of economics that studies government activities and<br>alternative means of financing expenditure (hymann 1993))<br>It is a fact that no society though out history has ever attained<br>a high level of economic affluence without a government. Where<br>government do not exist anarchy reigned and little wealth was<br>accumulated by productive economy activity. After government took<br>hold the rule of law and the establishment of private property right<br>often contributed and it has similarly impacted on their societies as<br>well.<br>Economic growth represents the expansion of a country GDP<br>or outputs. Growth means an increase in economic activities.<br>Todaro (1995) Citing Kuznets defined a country economic<br>growth as a long term rise in capacity to supply increasing diverse<br>economic goods to is population, this growth capacity based on<br>advancing technology and the institutional and ideological<br>adjustment that is demand. The board objective of this project is<br>the role of government expenditure in economic growth.<br>Government is necessary through by no means sufficient<br>condition for prosperity it is also a facts, however, that where<br>government have monopolized the allocation of resources and other<br>economic decisions, societies have been successful in attaining<br>relatively high level of economic affluence. Economic progress is<br>limited both when it is at or near 100%. The experience of the old<br>Soviet Union is revealing as well the comparison of east and West<br>Germany during the cold war era or of north and South Korea<br>today.<br>In the Nigeria context, the public sectors consist of the federal<br>government, state government and local government. The second<br>national development, just as it considered public enterprise as<br>crucial to growth and self reliance due to capital scarcity, structural<br>defects in the private sector. Third nation’s development plan(1975-<br>1980) advocated some shift in resources allocation in favors of rural<br>areas which were said to have benefited little from the economic<br>growth of the 1970’s.<br>Thus smaller farmer and the rural population were expected to<br>benefit from public expenditure.<br>During the first nation rolling plan (1989-1991), government<br>aimed at effort to combat inflation, hence large budgetary deficits<br>were to be made more avoided. Government expenditures were to be<br>made more cost effective and kept at level that were consistent with<br>the nations resources realistic growth target and general economic<br>stability<br>The major instruments by which the government can ensure<br>an effective growth in economic activities are;<br>i. Expenditure that induce the firm or workers to produce<br>certain goods and services.<br>ii. Taxes that reduce private consumption or investment and<br>thereby free resource for public expenditure.<br>iii. Regulation and controls that direct people performance or<br>desist for economic growth to attain economic growth.<br>These objectives are summarized as;<br>a. Provision of infrastructural facilities such as good roads, light,<br>water, transport and communication facilities etc in both<br>urban and rural area with the view to adequate support to the<br>productive sector and enhancing private sector participation<br>on the various sectors of the economy.<br>b. Streamlining public expenditure to give priority to the<br>completion of the initial ongoing viable project.<br>Direct expenditure is that incurred in an establishment of<br>economically viable commercial enterprises such as iron and steel<br>complex, oil and gas refineries etc.<br>Government expenditure in addition to raising the level of<br>economic growth also influences the pattern of production and the<br>component of output.<br>Generally government expenditure is classified into two which<br>are by current expenditure which involves all expenditure by<br>government for maintenance of existing or new institutions and<br>services, they are salaries, wages of public offers and fringe benefits<br>and expenses for servicing activities which involves administration,<br>defense and other social services like education, health and pension<br>schemes.<br>The other one is capital expenditure this are the cost of<br>bringing into existence new institutions, services and project. It is<br>simply all government expenses on building road, factories, schools,<br>and equipment requirement for providing social and economic<br>services.<br>1.2 STATEMENT OF PROBLEM<br>The size of government expenditure and its effects on long-run<br>economic growth and vice versa has been as issued of sustained<br>interest for decades.<br>According to Dunnet (1990) economic growth is an increase in<br>real per capita gross national product (GNP).<br>Economic growth is the steady process by which the<br>productivity capacity of an economy is increased over time to bring<br>about rising level of national output and income.<br>Growth is an engine of development, there can be no<br>development without growth hence, and economic growth is<br>desirable since it associated an increase in welfare.<br>At the new dawn of millennium Africa in general and Nigeria in<br>particular still face monumental development like low level of<br>income characterized by low per capita income, inequality, poor<br>health and inadequate education. All this are consequences of<br>poverty Nigeria present a paradox the country is rich but the people<br>are poor. Per capital income today in Nigeria is around the same<br>level as 1970.<br>Meanwhile between1970-2000 over 200million dollars has<br>been earned from the exploitation of countries resources.<br>Nigeria is rich in land, oil, people and natural gas resources,<br>yet Nigeria has been bedeviled with debts problem.<br>Nigeria has been classified by the World Bank as a low<br>developing country. She is characterized by the wide spread<br>poverty not less than 60% of Nigerian population are below poverty<br>line according to the united national development report (UNDP)<br>1998.<br>The better reality of the Nigerian situation is not yet that the<br>poverty line is getting worse by the day but more than fourteen of<br>Nigerians live in condition of extreme poverty of less than ₦320 per<br>month which barely provide for a quarter of the nutritional<br>requirement of health living.<br>The sluggish growth of the Nigerian economy despite the<br>increase in government expenditure has been rather surprising.<br>Since independent according to Kweka, P.J (1969, 1986,<br>1999), government consumption and investment expenditure in<br>Nigeria has been on the increase.<br>On the other hand, the GDP growth rate of Nigerian economy<br>has not been regular; in fact it has been less static. In order to<br>successfully map out a strategy for accelerating Nigeria’s growth<br>rate in the year ahead it is necessary to full understand the sources<br>of economic growth in Nigeria during the past four decades. One<br>will notice that government expenditure in Nigeria has been on the<br>increase.<br>1.3 OBJECTIVE OF THE STUDY<br>1. To find out if government expenditure significantly affects<br>economic growth in Nigeria.<br>2. To find the causality direction of the relationship between<br>government expenditure and economic growth in Nigeria.<br>1.4 STATEMENT OF HYPOTHESIS<br>The following null hypothesis will be tested at 5% level of<br>significance.<br>1. H0= government capital expenditure has no impact on the<br>Nigerian economy.<br>2. H0= government recurrent expenditure has no significant<br>impact on the Nigerian economy.<br>3. H0=there is no direction of causality between gross domestic<br>product and government expenditure.<br>1.5 SIGNIFICANCE OF THE STUDY<br>This study has much significance on household, stakeholders<br>and no government as a whole, because economic growth is an<br>engine of the economy.<br>i. This research will serve as a research as a references on the<br>other researcher who may carryout research work in this field<br>of study.<br>ii. This research would help Nigerian government and her policy<br>makers to restore fiscal discipline in Nigeria.<br>iii. This study would help in the debt management in Nigeria.<br>1.6 SCOPE AND LIMITATION OF THE STUDY<br>In any research study of this nature, there is normally the<br>enthusiasm to touch as many areas as possible which are<br>connected to the various needs of such study.<br>However due to the nature and scope of the work, such a wild<br>scope is out of the question since a work of this nature can hardly<br>achieve a feat.<br>This study will examine mainly the Impact of government<br>expenditure on economic growth of Nigeria covering the period 1980<br>to 2011.</p><div><div></div></div><br> <br><p></p>