THE IMPACT OF PUBLIC SPENDING ON POVERTY REDUCTION IN NIGERIA [1980-2011]

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  • Name: THE IMPACT OF PUBLIC SPENDING ON POVERTY REDUCTION IN NIGERIA [1980-2011]
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ABSTRACT

This work was done to analyze the impact of public spending on poverty eradication in Nigeria from (1980-2011). In this research work, multiple regression analysis was used and five variables were used in the empirical analysis. They are government expenditure on agriculture and water resources (AGWR), health (HTH) education (EDU) transportation and communication (TRCM) and Housing and environment. The data used in this research was collected from secondary data obtained from National Bureau of Statistics (2008) (MBS), and CBN statistical bulletin. The major findings shows that government expenditure on health, education and transport and communication are insignificant and a unit increase of government expenditure in these sectors will reduce poverty level. While that of agriculture and water resources, and housing and environment are significant and a unit increase will increase poverty level. Recommendation were proffered based on the findings of this research. That the government at all level should ensure that its expenditure are channeled towards projects that will reduce poverty level in Nigeria.

TABLE OF CONTENTS

Empirical literature – – – – – – – – 15 2.3.1 Approaches to poverty alleviation in Nigeria – – – – 16 2.3.2 Poverty reduction strategies in Nigeria – – – – – 20 2.3.3 Causes of poverty reduction in Nigeria – – – – 25 2.3.4 Achievement of poverty reduction in Nigeria – – – 27

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CHAPTER THREE

3.0 RESEARCH METHODOLOGY – – – – – 30 3.1 Methodology – – – – – – – – – 30 3.2 Model specification – – – – – – – – 30 3.3 Method of evaluation- – – – – – – – 32 3.3.1 Statistical Test – – – – – – – – 32 3.3.2 Econometric Criteria (Second-Order Test) – – – – 33 3.3.3 Economic A Priori Test – – – – – – – 34 3.4 Source of data – – – – – – – – 34 CHAPTER FOUR RESULT PRESENTATION, INTERPRETATION AND DISCUSSION

4.1 Result presentation – – – – – – – – – 35 4.2 Result interpretation – – – – – – – – 36 4.2.1 Analysis of the Regression Coefficients – – – – 36 4.2.2 Analysis of the Evaluation Methods – – – – – 37 4.2.2.1 Evaluation Based on Economic Criteria – – – – 37 4.2.2.2 Evaluation Based on Statistical Criteria – – – – 38 4.2.2.3 Evaluation Based on Econometric Criteria – – – – 40 4.3 Hypothesis Testing – – – – – – – 43 Conclusion – – – – – – – – – 43 CHAPTER FIVE SUMMARY, CONCLUSION, AND RECOMMENDATIONS

5.1 Summary of Findings – – – – – – – 45 5.2 Recommendation – – – – – – – – 46 5.3 Conclusion – – – – – – – – – 48 References – – – – – – – – – 49 Journals – – – – – – – – – 50 Appendix I

CHAPTER ONE

BACKGROUND OF THE STUDY
Public spending represents the annual expenditure by the federal
government to achieve some macro-economic objectives which may include
poverty reduction, increase in national productivity and macro-economic
stability in the system.
Since the late 1980’s, an increase in public spending has become a
major instrument in Nigeria. This was attributed to the following reasons as the
major causes of an increase in government expenditure in Nigeria. First is the
dominant role of public sector in major economic activities in Nigeria. This
could be attributed to several factors among them are oil boom of the early
1970’s, the need for reconstruction of war affected areas after Nigerian civil war
in 1970, the industrialization strategy adopted at that time by the federal
government (import substitution strategy) and the need to raise gross domestic
product (GDP).
On the other hand, the collapse of oil prices in and general
mismanagement of the economy in 1980’s brought the issue of poverty
eradication in Nigeria. Furthermore, the recent flood disaster in Nigeria has re
awakened the fight against poverty in Nigeria. In the mid 1980s, it was observed
that the private sectors were declining in economic activities as measured by
aggregate output, industrial production, non oil exports etc. were all showing
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decreasing signs. Above all, there widespread evidence of massive poverty in
the economy despite of the growing public expenditure and fiscal deficit in the
economy (library of congress country studies 1980’s).
In 1986, all major socio-economic indicators were showing downwards
which brought high rate of unemployment and decreased in purchasing power.
Poverty was spending among Nigerians especially the low income earners and
economic growth was downward sloping.
Poverty in Nigeria did not become an issue of great concern until after
the oil boom when the international oil price crashed and there was an
international economic slump. The continuous downward trend in the oil prices
in the international market increased the poverty level in Nigeria. The over
dependency on oil revenue and inadequate efforts to mobilize funds from non oil
sources led to a serious decline in government revenue. External reserve
deteriorated, and cause huge accumulated trade arrears and thereby limiting
government effort in provision of basic amenities and social facilities.
Thus the poverty level in Nigeria continues to be on the increased over the
past few decades. The 1991 world development report (WDR) showed that
Nigeria the most populous country in Africa has a significant number of her
population categorized as poor people.
In recognition of the adverse effect of poverty in Nigeria, federal
government set up Structural Adjustment Program (SAP) to reduce over
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dependency on oil and to provide food to all Nigerians. This had been followed
by the introduction of other policies such as national FADAMA programs.
Furthermore, the federal government made poverty reduction the core objectives
of its annual budget and also initiated various policies measures aimed at
promoting people’s welfare and reducing poverty in the economy.
Poverty become an issue of global dimension with nations striving either
to reduce or outright poverty in there economy. The complexity of the
phenomenon and its impacts on national economics has attracted the attention of
international organizations and agencies with government in different nations
embarking on policies aimed at reducing poverty. Consequently, Nigerian fiscal
policies especially as regard expenses in the areas that have positive impact on
the well being of the poor, have progressively being on the increase over the
years. Recently, the Imo State government took a bold step towards poverty
reduction by introducing free education to all the indigenes of the state up to the
tertiary level.
Finally, the extent to which government spending have impacted on the
well being of the people prompted this study.

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1.2 STATEMENT OF THE PROBLEM
In Nigeria, poverty has been on the increase which can be attributed to
inequality existing in the economy such as corruption, macro-economic
instability and inconsistency in government policies. In an ordinary framework,
poverty is concern with absolute, modulate or relatively standard of living or
inability to attain a minimal standard of living. Poverty is found to be at the
worst in the rural areas. Which is characterized by malnutrition lack of standard
education, low life expectancy and sub-standard housing? In attempt to alleviate
these problems, three actors are observed in the literature as being involved in
any giving country. Namely; the three ties of government (federal, state and
local government), international organizations and nongovernmental
organizations (NGO’s).
1.3 RESEARCH QUESTION
i To what extent has public expenditure affected the levels of poverty and
economic growth in Nigeria?
ii What is the direction of relationship between public expenditure and
poverty reduction in Nigeria?

1.4 OBJECTIVE OF THE STUDY
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In the context of this study, the following objectives will be achieved.
i To evaluate the impact of public expenditure on poverty reduction in
Nigeria
ii To determine the direction of relationship between public expenditure and
poverty alleviation in Nigeria.
1.5 RESEARCH HYPOTHENSIS
Ho: Public expenditure has no impact poverty reduction in Nigeria
Ho: There is no direction of relationship between public expenditure and
poverty reduction in Nigeria.
1.7 SIGNIFICANT OF THE STUDY
A research to investigate the impact and relationship between public
expenditure and poverty reduction in Nigeria occupies an important detail which
cannot be over-emphasized. The parastatas responsible for poverty reduction in
Nigeria will find this study useful as it will unveil the current poverty profile and
better strategies to alleviate them.
In the other hand, the federal government will benefit from this because it
will help them to channel public fund on the economy judiciously.
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Finally, the rural dwellers whose represent gross poverty in Nigeria
remains the most beneficiaries of this study because it will help government to
make policies that will promote their standard of living.
1.7 SCOPE AND LIMITATIONS OF THE STUDY
This study is limited to analyze the impact of public expenditure and
poverty reduction in Nigeria from 1980-2011. The choice of this period based
on the economic history. The 1980s witnessed a radical change in Nigerian
economy, which led to the introduction of structural adjustment program (SAP).
It also the period when the standard of living index fell, was resulting in further
rise in the incidence of poverty.
Furthermore, looking at how government expenditure helps in reducing of
poverty, not all sectors of the economy were used. The sectors are those that
have direct impact on people’s welfare, which include agriculture and water
resources, health, housing and environment, education, transportation and
communication.
This research work suffered some limitations because research in
economics has never been easy with the researchers. In most cases the
researcher is threaten to a number of factors such as; the mobility of involve in
this research was stressful; the time required to carry out this research was
highly limited as the researcher required time for other academic activities.
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Finally, despite of the above problems encounted, by the special grace of
God, the objective of this study will be achieved.

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