AN EMPIRICAL STUDY OF THE IMPACT OF FISCAL POLICY ON PUBLIC CONSUMPTION AND EXPENDITURE IN NIGERIA 1975 – 2005
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AN EMPIRICAL STUDY OF THE IMPACT OF
FISCAL POLICY ON PUBLIC CONSUMPTION AND EXPENDITURE IN NIGERIA
1975 – 2005
ABSTRACT
The
research seeks to test impact
of fiscal policy on public
consumption and expenditure in Nigeria 1975-2005. Government
consumption and expenditure variables used,
already divided the interest
of total debt and total revenue. We
find that Government Capital
Expenditure is negatively related
but positively related to Government
Consumption Expenditure. Size was
used as a control variable and
the results proved that Government
Capital Expenditure is a weak determinant of
Government consumption Expenditure.
The
goodness of fit of the model indicated
that the model has a good
predictive ability having used
the Durbin-Watson analysis. There is no direct
relationship between Government consumption
Expenditure and Government Recurrent Expenditure, since
an increase in Government Recurrent
Expenditure ought to increase Government
Consumption Expenditure.
TABLE OF CONTENTS
Title
Table of
Content
Abstract
CHAPTER ONE
1.1
Introduction
1.2 Statement of the Research
Problem
1.3 Objectives of the
Study
1.4 Scope of the
Study
1.5 Significance of the
Study
1.6 Statement of Research
Problem
1.7 Study
Limitations
CHAPTER TWO
Literature
Review
2.0 Conceptual
issues
2.1 Fiscal Policy and Public
consumption and Expenditure
2.2 Limitations of Fiscal Policy in
controlling public
Expenditure
CHAPTER THREE
3.1
Introduction
3.2 Theoretical Framework
3.3 Model
Specification
3.4 Method of Data
Collection
3.5 Method of Data
Analysis
3.6 Problems of Data
Collection
CHAPTER FOUR
4.0
Introduction
4.1 Presentation of
Results
4.2 Interpretation of
Results
CHAPTER FIVE
5.0 Summary of
Findings
5.1
Recommendations
5.3
Conclusion
Bibliography
CHAPTER ONE
1.1
INTRODUCTION
The
structure of the Nigerian economy has
been involving since the nation
was put together by British in
the early part of this century. Prior
to the second world war,
the Nigerian economy was solely
based on Agriculture with little emphasis
on export.
After independence
from the British, the economy took a spiral leap
towards development. Many structures were
put in place by the government
of the day to turn the economy
around . One of these was the Structural Adjustment
Programme of 1986.
Prior to independence, the Nigerian economy
was characterized by under – development, dualistic
tendencies and un-organization. (Itoha, Itsede,
2003).
There has been concerned effort by various
government in Nigeria to develop
and regulate the economy. And one
of the tools used by the government is
its fiscal and monetary policies.
Monetary policy is a tool employed by government
to achieve internal and external balance. It is a
macroeconomic tool.
Fiscal policy involves the use of government
budget to influence the
level of economic activities ( Itoha,
Oyefusi, Otiakhi, 2003).
For the purpose of this project, our emphasis
will be on fiscal policy
and it’s effect on public consumption
expenditure.
Fiscal policy refers to the
use by government of it’s
expenditures and taxes to influence
the level of aggregate demand
in the economy. Government expenditure
in the economy constitute
an injection into the economy
while taxes serves as leakages
out of the flow of
economic activities and Income.
w.w.w.wikepedia.com/ finance.
Government expenditure in the economy has varied
over the years. In the years 1975 –
1992, Government expenditure share in
the country’s Gross domestic product (GDP)
has been 1975 60.5%) 1978 (18.4%) 1992 (31.8%)
selectively. In 1997, it was 17.6%. This
low percentage in 1997 may be due to
Military interference in the
government.
The
higher the percentage, the higher the level
of public expenditure on consumption.
The fiscal policy of any country has a
big role to play in public expenditure
on consumption
1.2
STATEMENT OF THE RESEARCH
PROBLEM;
The
role of every society (developed or
under-developed) is to maximize
the available resources to
determine societal preferences. One
of the instrument used by
government to achieve this
purpose is the use
of fiscal policy to raise
revenue and determine the kind of
expenditure (both on consumption and capital) to
embark upon.
Consumption expenditure over
the year has form part
of the major outlay from
government purse. Such consumption
are monies spent on day to day
maintenance of government (current Expenditure) –
The problems that will be
answered in the course of
this study are:
i)
What role has fiscal
policy played over the years in
raising fund and finance Expenditure by
government.
ii)
Despite the high consumption Expenditure by
government , the Nigeria
Economy is
still hampered with the problem of
inadequate funding of the various government Ministries
and Parastatals.
1.3
OBJECTIVES OF THE STUDY; The objectives
of the study is to
examine the impact of fiscal
policy on the public consumption
expenditure in Nigeria 1975 – 2005.
The objectives of the
study are;
1)
To ascertain whether increase in
consumption expenditure in Nigeria
between 1975 to 2005 has
increase to level of economic development
2)
What fiscal policies have
been used by the government
from the period 1975 – 2005
and it’s impact on consumption
expenditure by the government.
3)
implementing tax collection
from the public.
1.4
SCOPE OF THE STUDY: This research work
will cover a several review of
the fiscal policy
that has been put
in place from the
period of 1975 – 2005.
Other areas to be
evaluated are:
i)
Consumer spending patterns in
the economy.
ii)
The role of budgets and
taxes as fiscal policies and
their impact in the economy.
iii)
The role of the central Bank
in managing and controlling in
implementing the fiscal policies.
1.5
SIGNIFICANCE OF THE STUDY: For the past years, the
researcher has scarcely, come across
any literature by local authors
on the subject matter. This
can be attributed to the slow pace of
development of the subject here in
1.6
Nigeria when compared with other
countries. This study is therefore a
contribution
1.7
To knowledge and scholars.
Particularly
this study would be beneficial to the
fellowship group of persons and significant
to the benefit derivable therefore.
i)
Students will benefit from this
scholarly article because there is
scarcely any local literature on
the rudiments of fiscal policy and
overall consumption and expenditure of
the public.
ii)
Corporate organization will benefit
from this study as it will have
a better understanding of the
fiscal policy in place and how it
affects it’s business.
iii)
This study will be significant to the
government as the government of the
present day will be
able to learn of
the trends in fiscal
policy development in the period under review and to
know the best options that suits the economy . Also, the government will be
able to know the spending patterns of the public.
iv)
The tool authorities will
benefit from this study as it
will be able to determine the tool
to be paid and it’s effect
on the paying public taking inflation into
cognizance.
v)
This study if followed will
lead to economic development in the
sense that high fiscal deficits jack
up interest rates or reduces
credit to the private and
public sectors of the economy.
It will also lead
to the implementation of
a well tailored fiscal policy
that will reflect the level
of public expenditure in the economy.
1.8
STATEMENT OF RESEARCH PROBLEM: In explaining
the impact of fiscal policy on government
consumption Expenditure, the following hypothesis have
been formulated.
1)
Increase in public consumption Expenditure
by government bring about an increase
in GDP.
2)
Increase in tool revenue by
government increase the level of government
spending on consumption.
3)
As inflation rate increase, the
level of spending on consumption increases.
4)
Total debt is a major determinant of
government expenditure in Nigeria
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