CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Government Expenditure no doubt is an
important instrument for a government to control the economy of a nation.
Economists have been well aware of the effects in promoting economic growth.
Anyway, the general view is that government expenditure notably on social and
economic infrastructure can be growth enhancing although the financing of such
expenditure to provide essential infrastructural facilities including
transport, electricity, telecommunication, water and sanitation, waste
disposal, education and health can be growth retarding (Olukayode, 2009).
Nowadays, the relationship between
government expenditure and economic growth has continues to generate sense or
controversies among scholars in economic literature (Inuwa, 2012). According to
him, the nature of the impact of government expenditure on economic growth is
in conclusion, and from the view point of the student researcher is still not
incontrovertible. As a matter of fact, while some author or researchers
believed that the impact of government expenditure on economic growth is
negative or non-significant (Tuban, 2010), others believed that the impact is
positive and significant *Alexiou, 2009).
The structure of Nigeria government
expenditure can bawdily be categorized into capital and recurrent expenditure
(Muritala 2011). The recurrent expenditure is basically government expenses on
administration such as wages, salaries, interest on loans, maintenance cost,
etc. However, the expenses on capital project like roads, airports, education,
telecommunication, electricity, generator, etc are generally referred to as
capital expenditure (Muritala, 2011).
Ironically, the effect of government
spending in Nigeria in relation to the economic growth is still a puzzle and an
unresolved issue. Indeed theoretically, it is an unresolved issue. Although the
theoretical positions on the subject are quite diverse, the conventional wisdom
is that or spending is a source of economic instability or stagnation.
Empirical research does not conclusive support the conventional wisdom, a few
studies report position and significant negative relationship between
government spending and economic growth while others find significantly
negative or no relation between an increase in government spending and growth
in real output.
It is against this backdrop, the study
is undertaken to empirically evaluate the impact of government expenditure on
economic growth in Nigeria.
1.2 Statement of Research
Problem
In the last decade Nigeria economy has
metamorphosed from the level of billion Naira to trillion Naira on the
expenditure side of the budget. The effects of this expenditure are largely
unnoticeable on the citizenry (Muritola 2011). Empirically, while a positive
and significant relationship between government spending and economic growth
have been established, there are much significant negative or no relationship
between an increase in government expenditure and economic growth, following
these mixed findings, the research question below are being raised.
1.2.1 Research Questions
1.
What is the relationship between
government real total capital expenditure and the economic growth in Nigeria?
2.
Is there a significant between government recurrent
expenditure and the Nigerian economic growth?
3.
Does the Nigerian government recurrent
revenue enhance the growth of the economy?
4.
What is the relationship between trade
openness and the growth of the Nigerian economy?
5.
How do macroeconomic variable induce
government expenditure and the economic growth in Nigeria?
6.
What is the relationship between
government policies and the economic growth in Nigeria?
1.3 Objectives of the Study
The objective of this study is
basically divided into general and specific objective. The general objective is
to examine the impact of government expenditure on the economic growth Nigeria.
However, the specific objective is as follows:
1.
To ascertain the relationship between
government real total capital expenditure and the economic growth in Nigeria.
2.
To find out if there is a significant
relationship between government recurrent expenditure and Nigerian economic
growth.
3.
To find out if the Nigerian government
recurrent revenue enhances the growth of the economy.
4.
To find out the impact of trade
openness on growth of the Nigerian economy.
5.
To ascertain how macroeconomic
variables induce government expenditure and the economic growth of Nigeria.
6.
To examine the relationship between
government fiscal policies and the economic growth of Nigeria.
1.4 Statement of Research
Hypotheses
In order to adequately evaluate the
impact of government expenditure on the economic growth of Nigeria, the null
hypotheses are used as follow:
1.
Ho: Government
capital expenditure does not improve the economic growth of Nigeria.
2.
Ho: government
recurrent expenditure does not enhance Nigerian economic growth.
3.
Ho: There
is no significant relationship between government recurrent revenue and
economic growth of Nigeria.
1.5 Scope of the study
This study principally examines the
impact of government expenditure on the economic growth of Nigeria. The impact
of government capital expenditure, recurrent expenditure, recurrent revenue and
other macro economic variables are critically examined under the study for the
period 1990-2011 with a view to maiming inference.
1.6 Significance of the study
The relevance of this study cannot be
over emphasized going by the present day government expenditure and the
regardless of the Nigeria economic growth the Nigeria government will find
outcome of the study useful in terms of knowing how best to structure yearly
budgets so as to benefit the citizen and enhance the economy, policy makers no
doubt will find this study very important to them. Economists and outcome of
the study useful in terms of further researchers.
1.7 Limitations of the study
There is no study undertaken by a
researcher that is perfect. The imperfection of any research is always due to
some factors negatively affecting a researcher in the course of carrying out
research. Thus, in this study the limitation include non-reliability of data,
and the problem of the outcome of the study.