Academic journal article International Review of Management and Business Research

The Effect of Public Expenditure on the Growth and Development of Nigerian Economy (1980-2012)

Academic journal article International Review of Management and Business Research

The Effect of Public Expenditure on the Growth and Development of Nigerian Economy (1980-2012)

Article excerpt

Introduction

The basic aim of the public sector as part of the macro-economy is the provision of necessary government services to the public. The provision of these services have a relationship with the growth of the economy. From the inception of the country, the government has been spending huge sum of money to provide services like security, public roads, education, health care etc., but the relationship between government expenditure and economic growth has not been ascertained. This situation has continued to create a division among scholars, both theoretically and empirically.

At the theoretical level, the Keynesian classical and Wagnerian are the major school of thoughts. The Keynesians propose that government expenditure is a genuine tool for the enhancement of economic activities hence growth. The classical school of thought refute excessive government expenditure as against the Keynesian, based on the fact that government is less efficient than the private sector in carrying out economic activities. Again they argued that excessive government expenditure especially when financed by taxation and government` borrowing distort economic activities because increased taxation in an attempt to finance government expenditure reduces consumer income and aggregate demand, as such the overall performance of the economy dwindles. The Wagnerian school of thought is of the opinion that increase in national output incite government expenditure.

However, at the empirical level some scholars arrived at the conclusion that there exists a positive relationship between government expenditure and national output or growth. Such scholars are: Iram (1986); korman and Brashmasrene, (2007); Donald and Shuggling, (1983). Others like Rebelo, (1990); Bamo, (1990) and 1991 arrived at a negative impact in spite excessive government expenditure. Other groups of scholars like Tanzi and Zee, (1997) and Akpan, (2005) discovered that there exist no significant impact of government expenditure on economic growth.

Consequently, pondering on these conflicting results from different scholars, it is therefore difficult if not impossible to ascertain what the true stance of government expenditure with economic growth is when considering the fact that the desired result of public expenditure may not be attained if resources are not channeled to the appropriate expenditure items, or even when it is channeled to the appropriate expenditure item the desired outcome may not be achieved owing to structural rigidities in the Nigerian economy.

Despite the ever increasing rate of government expenditure in recent times, in Nigeria, there has not been a commensurate growth in the economy. It appears that either these funds are not released or they are released to finance an inappropriate expenditure item or maybe the funds are mismanaged or not dully utilized. For instance, Nigeria spends significant proportion of her financial resources on the educational sector annually through it budgetary allocation, yet the quality of education in terms of infrastructures, the learning environment, and the performance of students is still low especially when compared to other African countries with equivalent or even lesser budgetary allocations and that of private schools owned by private individuals.

It must be noted that there is a popular saying that ''health is wealth''; implying that a healthy country is a wealthy nation. In 2014, the allocation to the health sector was 262.74 billion Naira out of which N9.109 billion was for the construction/provision of hospitals/health centers, N115 million was on HIV/AIDS control, N213.321 million was on cancer control and N85.653 million on malaria control. Though Osaha, Enabulele, the president of the Nigerian Medical Association (NMA) complained of the reduction in allocation compared to other years. In other years like 2013 with a higher allocation, it was noticed that the people were still dying of common illness like malaria and others as a result of lack of infrastructure for which funds were allocated. …

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