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THE IMPACT OF
PUBLIC EXPENDITURE ON ECONOMIC GROWTH: THE NIGERIA EXPERIENCE 1990-2005.
ABSTRACT
This study was carried out to determine the impact
of public expenditure in the economic growth. The Nigerian experience
1990-2005. This research examines the extent to which the impact of public
expenditure in the economic growth. It highlights the adverse effect of
inflection on the monetary efficiency might also affect the growth process this
is one reason for the negative relationship between growth and inflation in an
nutshell, both the high rate of inflation and slow growth of GD are due to
other causes such as wars disturbance or natural disaster affecting many
I.D.C.S on was in which inflation might actually promote growth if used to
mobilize resource for investment in the form of forced saving. The hypothesis
stated was tested using the T-test on T-test was treated in the study as a
two-tailed test, this means that the hypothesis are of the null and alternative
form. The T-test is seen as the continuation of the standard error test
formulated. As: T-test Ce t*=ai S(ai) finally, the question of economic
development which one of the major objectives of any government can only be
attained through prudence management of the nation’s resources, if the
government must achieve their traditional aim of discharging their social
political and economic responsibility to its citizens.
TABLE OF CONTENTS
Title Page i
Certification ii
Dedication iii
Acknowledgment iv
Abstract v
CHAPTER
ONE: INTRODUCTION
1.1 Background
of the study 1
1.2 Statement
of the problem 4
1.3 Objectives
of the study 6
1.4 Research
questions 7
1.5 Hypothesis 7
1.6 Limitation
of the study 7
1.7 Significance
of the study 8
1.8 Delimitation
of the study 9
1.9 Definition
of terms 10
CHAPTER
TWO: REVIEW OF RELATED LITERATURE
2.1 Definition
of public expenditure 12
2.2 Canon
of public expenditure 12
2.3 Public
expenditure and economic growth 13
2.4 Public
expenditure structure and categorization 14
2.5 Role
of public expenditure 15
2.6 Inflation
and economic growth 16
2.7 Measurement
of public expenditure 17
2.8 Economic
theories of public expenditure 19
2.9 Public
expenditure and economic growth 19
CHAPTER
THREE: METHODOLOGY OF THE STUDY
3.1 Definition
of area and population of the study 21
3.2 Procedure
for data collection 21
3.3 Procedure
for data analysis 23
3.4 Model
specification 24
CHAPTER
FOUR: PRESENTATION AND ANALYSIS OF DATA
4.1 Presentation
of data collected 25
4.2 Presentation
of result 26
4.3 Interpretation
of result 27
4.3.1 Standard error test 28
4.3.2 The test 30
4.4 Discussion
of results 31
CHAPTER FIVE: SUMMARY, CONCLUSION AND
RECOMMENDATION
5.1 Summary 33
5.2 Conclusion 34
5.3 Recommendations 35
Bibliography
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Public
expenditure is an integral part of fiscal policy. Fiscal policy refers to the
use of fiscal instruments to influence the workings of economic system through
deliberate manipulation of government expenditure and taxation.
Government
expenditure on its part means government spending on public sector, which
includes defense, education, health services, portable water, electricity and
other basic infrastructures. Taxation constitutes the various sources of
generating revenues to finance government expenditure. Government spending and
taxation thus constitute the compensatory devices often used to affect fiscal
policy plan. Using in this study, we are going to bise our work on government
expenditure.
Public
expenditure also plays significant roles in the functioning of an economy at
all levels of development, its traditional macro-economic role is to stabilize
the economy along with other policy instruments in a package approach. But
development theory assigns it much wider role particularly in developing
countries like ours. The wide scope of government activity includes the big
push, balanced and unbalanced growth, redistribution growth, basic needs etc.
it is an integral part of the answer to the vital micro-economy question of
what and for whom to produce, and to lesser ettent even the how question as
well. Public expenditure course levels of government federal, state and local
government.
The
way in which public expenditure are allocated has significant effects on both
economic growth and poverty alleviation. It can be used in a discriminatory
manner to after the allocation of resource both geographically and
industrially. Government spending may be raised towards projects in development
area or towards certain industries. To make government expenditure efficacious,
it is essential that resources allocation decision are underpinned by sound
analysis and that a well-designed set of institutions, systems and a
performance focus guide budget formation and execution.
Government
generally seeks to achieve four main objectives in their involvement in the
economy. These are the promotion of economic growth, employment creation, price
stability and external balance.
Government
expenditure could be functionally broken down into two components: the first
such component is for production meant to increase the level of goods and
services available to the economy and the other transfer payment, which include
payments on public debts, pension and gratuity, etc, which are regarded as
unproductive. The impact of public expenditure on developing economy like
Nigeria cannot be over emphasized by advices economic situation, ranging from
unemployment, exchange rate devaluation, unfavourable balance of payments and
trade low per capital income, less diversified income base, low level of
industrialization etc. this is due to the fact that private investors and
develop economic will be skeptical to invest in it, because of mismanagement of
public funds and the instability in the economy.
Thus,
this gives rise to the need or rational for government intervention to foaster
development of their economy. Hence the government through government
expenditure is expected facilities or induce public policies that would lead to
the creation of a positive impact on their economy.
1.2 STATEMENT OF THE PROBLEM
This
study is designed to assess the impact of public expenditure in a development
economy evidence from Nigeria. According to Ekpo (1995) public expenditure
provides information on how government policies are to be restructured and the
type of infrastructure investment to embark on in any economy are stipulated in
the annual budget. Immediately after independence, public expenditure was
concentrated on general restructuring and re-organization of the administrative
system set up by the British.
From
1996 when the civil war started to 1970 when it ended more than 60 percent of
public expenditure in Nigeria was for the prosecution of war. Government
printed high powered money, which was mainly used to pay soldiers and its consequence
was hyperinflation. Between 1970 and 1974 government spent a great of its
revenue establishing expanding and reinvigoration public enterprise. This is in
compliance with the provision of the second nation development plan (1970-1974)
which considered public enterprise crucial to economic growth and self-reliance
at that time. The third national development plan (1975-1980) was funded form
the execs revenue form the oil boom. Accordingly, it had its priority as the
development of rural areas and to subsidize education, water supply, healthy
services and electricity.
Between
1981 and 1985 the oil boom had gradually turned to oil doom and the revenue
from oil diminished substantially. This period witnessed very tight fiscal
policy in accordance with the provision of the fourth plan (1981-1985) (Anganw
et al 1997). Taking a consolatory look at the pub expenditure policies and
economic plans, there are loopholes due to some adverse economic effects and
mismanagement. Conversely, this study has originated as a result of the desires
to promote the improvement of the general economic situation through government
or public expenditure. The problem of the developing economy like Nigeria can
envisaged inadequate education facilities, inequalities in the society and
distribution of wealth; high inflationary trend; unbridled depreciation of the
naira exchange rate of other foreign currency; income; neglect of the rural
areas, mismanagement of public funds, etc. these adverse economic conditions
had led to increase in the sufferings of the citizens exponentially, accompanied
by soaring unemployment, youth restiveness, public health problems which had
led to people living in dilapidated buildings.
1.3 OBJECTIVE OF THE STUDY
The objectives or aims of this study
include the followings:
i) To
ascertain the relationship between expenditure and economic development.
ii) To
determine the level of impact public expenditure have an economic development
1.4 RESEARCH QUESTION
i) What
level of impact does public expenditure have on economic growth?
ii) Does
public expenditure have any impact on Nigerian economy?
iii) What
is the relationship between public expenditure and economic development?
iv) Is
there any other factors apart from public expenditure that affects economic
development in Nigeria?
1.5 HYPOTHESIS
H01:
There is no significant relationship between public expenditure and economic
development in Nigeria.
HA:
There is a significant relationship between public expenditure and economic
development in Nigeria.
1.6 LIMITATION OF THE STUDY
Due
to the fact that this research is carried out in Nigeria, it cannot be used
generalized because what happens in Nigeria economy may not happen in another
country’s economy due to the fact that the countries practice different
economic policies. Adequate information on sensitive economic and development
issues were not readily available.
Administrative
bureaucracies in public parastatels posed a constraint to adequate collection
of information. Furthermore, the research is limited Nigerian due to the huge
expenditure its type of research work would consume. Finally limited time is
given to undertake this research work but there should be enough time to
undertake this study, because the subject is vast.
1.7 SIGNIFICANCE OF THE STUDY
The
study is useful to developing economy, because it tells them the type of public
expenditure policy to implement in order to enhance economic development. The
study is also useful because it helps leaders and policy makers in developing
economy to identify the factors that influence and affect public expenditure.
Furthermore, the study is relevant because it will help to determine (if any)
the effect public expenditure have one economic growth. And the study would be
relevant to students, the public etc. who intend to carry our similar works in
the future.
1.8 DELIMITATION OF THE STUDY
This
research study is delimitated to Nigeria from 1991 to 2005.
Economy
It
refers to the relationship between productions, trade and supply of money in a
particular country region.
Development Country
It
refers to a country or society that is poor and is trying to make its industry
and economic system more advanced.
Determinants
These
are things or factors that decide whether or how something happens.
Investment
Is
the purchase of new capital goods by firms? National income is the economy not
national product it is calculated by subtracting depreciation from G.D.P at
factor cost.
GD.P. at Market Prices
Measure
domestic output inclusive of indirect rates on goods and services. GDP at
market prices =c+1+G.
Gross Domestic Product (GDP)
Measures
the output produced by factors of production located in the domestic economy
regardless of who owns these factors.
1.9 DEFINITION OF TERMS
The
following terms as used in this study are defined as follows:
Public Expenditure
This
refers to the expenses which government incurs in the performance of its
operations. Or is the amount of money spent by government in the maintenance of
itself and society and also in the running of its fiscal policy.
Public Sector
This
refers to a situation where the government participates fully in the economy in
the area of resource allocation, the distribution of income, employment and the
coordination of the society as a whole and the individual that makes it up.
Budget
A
budget is a financial or quantitative statement of plans to be pursed for
achieving given objective or is a statement of revenue and expenditure for a
fiscal year.
Economic Development
Is
the non-quantitative measure of a growing economy?
Private Sector
It
is the sector of the economy that is controlled and managed by private
individuals.
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