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THE IMPACT OF PUBLIC EXPENDITURE ON ECONOMIC GROWTH: THE NIGERIA EXPERIENCE 1990-2005.
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
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
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?
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.
It refers to the relationship between productions, trade and supply of money in a particular country region.
It refers to a country or society that is poor and is trying to make its industry and economic system more advanced.
These are things or factors that decide whether or how something happens.
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:
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.
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.
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.
Is the non-quantitative measure of a growing economy?
It is the sector of the economy that is controlled and managed by private individuals.