ABSTARCT
The work was on the impact of Government Expenditure on Nigeria
Growth (1981 – 2010) dealing with secondary data from the Central
Bank of Nigeria (CBN) and the National Bureau of Statistics Regression
Analysis with (OLS) technique was used. Our findings indicate that
there is a positive correlation between Inflation, Money Supply,
Government Consumption Expenditure. While Money Supply and LGDP-I
has a positive impact on the dependent variable (GDP). But the GE
(Government Expenditure) and M2 (Money Supply) has a significant
impact on the model with 2.800 and 0.190 respectively. Also the model
shows a good fit at 96% of the dependent variable accounted for by
independent variable.
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TABLE OF CONTENT
Title page – – – – – – – – – – -i
Approval page – – – – – – – – – -ii
Dedication – – – – – – – – – – -iii
Acknowledgement – – – – – – – – -iv
Abstract – – – – – – – – – — -vi
Table of content – – – – – – – – – -vii
Chapter one
1.0 Introduction – – – – – – – – -1
1.1 Background of the study — – – – – – -1
1.2 Statement of the problem – – – – – – -3
1.3 Objective of the study – – – – – – – -6
1.4 Statement of hypothesis – – — – – – -6
1.5 Significance of the study – – – – – – -6
1.6 Scope and limitations of the study- – – – – -7
Chapter two
2.0 Literature Review- – – – – – – – -9
2.1 Theoretical Literature – — – – – – – -9
viii
2.2 Empirical Literature – – – – – – – 13
Chapter three
3.0 Methodology – – – – – – – – 24
3.1 Nature Of Model – – – – – – – – 24
3.2 Model Specification – – – – – – – 24
3.3 Method Of The Estimation – – – – – – 26
3.4 Method Of Evaluation – – — – – – – 27
3.5 Data Required And Source/Software Package – – – 29
Chapter four
4.0 Presentation And Analysis Of Result – – – – 30
4.1 Presentation And Analysis of result- – – – – 30
4.2. Result interpretation – – – – – — – 31
4.3. Economic apriori criteria – – – – – – 31
4.4 Statistical Criteria (first order test) – – – — – 32
4.5 Economic Criteria- – – – – – – – 35
4.6. Policy Implication- – – – – – – – 40
ix
Chapter five
5.0 Summary, Policy Recommendation And Conclusion – – 42
5.1 Summary Of Finding – – – – – – – 42
5.2 Policy Recommendations – – – – – – 43
5.3 Conclusion – – – – – – – – – 44
Bibliography – – – – – – – – – 45
Appendix A – – – – – – – – – – 47
Appendix B – – – – – – – – – – 49
1
CHAPTER ONE
1.0 INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Following the classical prescription before the great depression of the
1930’s the role of government in the economy were Limited to the few
of services like law and order, natural security and promotion of
property rights. Adam Smith (1776) in his discussion of the proper role
of the government listed three factors. First “protecting the society from
the violence and invasion of other independent societies, secondly,
protecting as far as possible every member of the society from injustice
or oppression every other member and thirdly, erecting and maintaining
those public work which through they may be in the highest degree
advantages to a great society are however of such a nature that the
profit could never repay the expense to ay individual or small group of
individual this list is referred to as the care function of the government.
Today however, the economic role of the government has expanded to
include consumption and investment expenditure.
Government or public expenditure has served as most commonly used
fiscal policy in growth, expansion, structural transformation and
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diversification of economic base. Public expenditure is used for
allocation, stabilisation and distribution (Musgrave and Musgave, 1989).
Hence, public expenditure programmes is a comprehensive set of
expenditure policy measures, designed to achieve a given set of
macroeconomic goals including the restoration of equilibrium between
aggregate domestic demand and supply (IMF 1993).
According to Gwartney (1998) while countries have moved towards
economic freedom and open markets, government expenditure has
increased more and more. Government expenditure can be defined as
spending by the national and local government and some government
based institutions. Economic growth is an increase in output or income
overtime, it is a positive change in the level of production of goods and
services over certain period of time. Economic growth is measured using
real gross domestic product (G.D.P).
There are few more hoting debased topics in economic that what the
government expenditure plays in economic growth. Keyesian argued
that government should manage the amount of demand in an economy
to maintain full employment. Since the 1950’s there has been growing
evidence that government intervention can also be flowed and can be
imposed even greater cost in an economy than market failure. There
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have been growing concern that government investment expenditure
have been, crowding out supervisor private investments.
Government expenditure has continued to increase as a share of GDP
within the organisation of economic Co-operation and Development
(OECD) countries, government expenditures amounted for a larger size
of GDP in 2002 that in 1999. In Nigeria, as in most countries, this is the
case. Why this increase in government expenditure? Is it in the interest
of the nation that the share of government expenditure in GDP is
increasing?
Most growth theories like the big push theory and the balanced growth
theory among others aimed at improving the growth rate in developed
countries. This need for development is hindered by lies saving which is
a result of low aggregation income in most developing countries.
1.2 STATEMENT OF THE PROBLEM
According to Dunnet (1990) economic growth is an increase in real per
Capital Gross National Product (GNP). Economic growth is the steady
process by which the productive Capacity of an economy is increased
over time to bring about rising levels of national output and income.
Growth is an engine of development. There can be no development
4
without growth hence; economic growth is desirable since it is
associated with an increase in welfare.
At the dawn of this new millennium, Africa in general Nigeria in
particular still faces monumental development like new level of living
characterised by low per capital income inequality, poor health and
inadequate education. All these are consequence of poverty.
Nigeria present a paradox the country is rich but the people are poor.
Per capital income today in Nigeria is around the same level as 1970.
Meanwhile between 1970 and 2000 over $200 million has been earned
from the exploitation of countries resources. Nigeria is rich on land, oil,
people and natural Gas Resources, yet Nigeria has been bedevilled with
debts problems until just recently when her debt was forgiven.
Nigeria has been classified by the World Bank as a low income
developing country. She is characterised by wide spread of poverty not
less than 60% of Nigerian population are below development report
(UNDP) 1988.
The better reality of the Nigeria situation is not yet that the poverty line
is getting worse by the day but more than four ten of Nigerians live in
5
conditions of extreme poverty of less than ₦320 per month which barely
provide for a quarter of the nutritional requirement of health living.
The sluggish growth of the Nigeria economy despite the increase in
government has been rather surprising since independent according to
Kweka, P. J. (1969 – 1986, 1999), government consumption and
investment expenditure in Nigeria has been on the increase. On the
other hand, has not been regular in fact it has been less static. The
decade of 1980’s is generally referred to as Africa “last decade of
development opportunities” Nigerian economy crisis in the early 80’s
was attributed to several factors including the collapse of price. The rise
in international interest rate and domestic policy mistakes.
In order to successfully map out strategy for accelerating Nigeria’s
growth rate in the year ahead, it is necessary to fully understand the
source of economic growth in Nigeria during the past four decades, one
with notice that government expenditure in Nigeria has been on the
increase. To what extent does this increase in government spending
affect the level of growth in Nigeria? In this work, using data on Nigeria
government expenditure from 1980 – 2009, we will try to answer the
question; Does government expenditure cause the bring about in
economic growth in Nigeria?
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1.3 OBJECTIVE OF THE STUDY
The objective of the study was specifically;
i. To find out if government expenditure significantly affect
economic growth in Nigeria.
1.4 STATEMENT OF HYPOTHESIS
The following null hypothesis will be tested at 0.05 level of significance.
H0: Government expenditure does not significantly affect economic
growth in Nigeria.
1.5 SIGNIFICANCE OF THE STUDY
The result of the study will be of great benefit to the federal republic of
Nigeria because economic growth is the motor *vehicle) of
development. Development is the sustained education of an entire
society and social activity towards a better tomorrow and more human
life. The result of this study will be significant in the following ways:
1) It will help the Nigerian government and her policy makers to
restore fiscal discipline in Nigeria.
2) The study will be important in debt management in Nigeria. This
include government restricting expenditure within he constraints
imposed by available revenue.
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3) It will also have implication for formulating a workable model for
Nigeria.
1.6 SCOPE AND LIMITATIONS OF THE STUDY
This study will use an empirical analysis of macro-economic environment
that prevailed in Nigeria between 1981 and 2010. However, literature
especially and notable works and event that relates to the study will be
examined.
In the course of this work, many problem were encountered which
affected the final result.
First, the death of required statistics and limited access to literature.
Some journals and publications which could have been of immense help
to this work were unavailable.
Secondly, the result of the fourth chapter were somehow affected by the
problem of the use of secondary data in Nigeria. Most of the estimates
are not reliable.
Thirdly, there is the limitation of the small sample size which has its
attended drawbacks. This research work is limited by a number of
constraints; greatest is the absence of vital data that would have
boosted its result expectation. There is also lack of strong evidence in
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the theoretical framework of this topic that would have provided a
reliable foundation for us to stem from and particularly Nigeria case.
Time constraint is equally one of them.
Due to the above constraints the data to be used are mainly secondary
data.
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