Public Expenditure: Implication on Economic
Growth in Nigeria (1990-2014)
Paul Aondona Angahar, PhD
Department
of Accounting
Benue State
University, Makurdi Angahar63@yahoo.co.uk
and
Jacob Sesugh Angahar
Department of Economics Kwararafa University,
Wukari jacobanagahar@gmail.com
Nigerian Journal of Management Sciences Vol. 5 No.2,
2016
pp 219-230Abstract
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T
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his research
investigates the implication of public expenditure in education on economic
growth in Nigeria over a period from 1990 to
2014, with
emphasis on total educational expenditure analysis. The objective of this study
is to evaluate the implication of public expenditure on economic growth in
Nigeria using Simple linear regression Mode. The study used Ex-post facto
research design and applied time series econometrics technique to examine the
effects of public expenditure on economic growth in Nigeria. The results
indicate that Total Education Expenditure is highly and statistically
significant and have positive relationship with economic growth in Nigeria in
the long run. We conclude that economic growth is clearly impacted by factors
both exogenous and endogenous to the public expenditure in Nigeria. It was
therefore recommended that, Government should direct its expenditure towards
the productive sectors like education as it would reduce the cost of doing
business as well as raise the standard of living of poor ones in the country.
Also efforts should be made to increase government funding on education to
curtail the level of strikes in our education sector and as well increase
funding on anti-graft or anti-corruption agencies like the Economic and
Financial Crime Commission (EFCC), and the Independent Corrupt Practices
Commission (ICPC) in order to arrest and penalize those who divert and embezzle
public fund.
Keywords: Public
expenditure, economic growth, education, gross domestic product
Introduction
Explaining the
phenomenon of the growth of government expenditure has always been a wide field
in the science of Public Finance. In developing countries, particularly, the
sub-Saharan African countries (SSA), harnessing domestic investment for growth
is contingent on the relative stability in the level of governance indicators
which are known to be highly volatile for the region. As a corollary, countries
within the region are politically endowed with long histories of poor and bad
governance (Chudi and Chudi, 2013). This assertion is further corroborated by
Akanbi (2010) when he submitted that poor governance that is reflected in the
unstable political environment in most African countries has been a major
hindrance to increasing domestic investment over the years. Thus, modeling
investment determinants for countries within the sub-region requires accounting
for the structure of governance. Failing to account for governance indicators
might make the study to be suffering from omitted variables bias, thus making
the emanated findings to be interpreted with a high order of caution and while
at the same time subjecting policy messages there from to be viewed with a high
degree of scepticism. Some scholars have argued that increase in government
spending can be an effective tool to stimulate aggregate demand for a stagnant
economy and to bring about crowed-in effects on private sector. According to
Keynesian view, government could reverse economic downturns by borrowing money
from the private sector and then returning the money to the private sector
through various spending programs. High levels of government consumption are
likely to increase
employment, profitability and investment via multiplier
effects on aggregate demand. Thus, government expenditure, even of a recurrent
nature, can contribute positively to economic growth. On the other hand,
endogenous growth models such as Barro (1990), predict that only those
productive government expenditures will positively affect the long run growth
rate. In the neoclassical growth model of Solow (1956), productive government
expenditure may affect the incentive to invest in human or physical capital,
but in the long-run this affects only the equilibrium factor ratios, not the
growth rate, although in general there will be transitional growth effects.
Others have argued that increase in government expenditures may not have its
intended salutary effect in developing countries, given their high and often
unstable levels of public debt. The government consumption crowd-out private
investments, dampens economic stimulus in short run and reduces capital accumulation
in the long run. Vedder and Gallaway (1998) argued that as government
expenditures grow incessantly, the law of diminishing returns begins operating
and beyond some point further increase in government expenditures contributes
to economic stagnation and decline.
Various empirical
studies on the relationship between government expenditure and economic growth
also arrived at different and even conflicting results. Some studies suggest
that increase in government expenditure on socio-economic and physical
infrastructures impact on long run growth rate. For instance, government
expenditure on health and education raises that productivity of labour and
increase the growth of national output. Similarly, expenditure on
infrastructure such as road, power etc. reduces production costs, increase
private sector investment and profitability of firms, thus ensuring economic
growth (Barro, 1990; Barro and Sali-i-Martin, 1992; Roux, 1994; Okojie, 1995;
Morrison and Schwartz, 1996). On the other hand, observations that growth in
government spending, mainly based on nonproductive spending is accompanied by a
reduction in income growth has given rise to the hypothesis that the greater
the size of government intervention the more negative is its impact on (Glomm
and Ravikumar, 1997; Abu and Abdullah, 2010).
Despite the rise in government
expenditure in Nigeria over these years, there are still
public outcries over decaying infrastructural facilities. Also, merely few
empirical studies have taken holistic examination of the effect of government
expenditure on economic growth regardless of its importance for policy
decisions. More so, for Nigeria to be ready in its quest to become one of the
largest economies in the world by the year 2020, determining the effect of
public expenditure on economic growth is a strategy to fast-track growth in the
nation's economy. A
crucial question that requires an urgent answer is whether the government
aggregated, disaggregated and sectoral expenditures impact positively on
economic growth of Nigeria. This study attempts to provide an answer to this
question by empirically estimating the effects of disaggregated and sectoral
educational expenditure on economic growth in Nigeria. This study comprises
section one introduction, section two review of related literature, section
three is methodology and section four is conclusion and recommendation.
Review of related Literature
Theoretical Framework
Wagner's Law
Wagner's Law is
named after the German political economist Adolph Wagner (18351917), who
developed a “law of increasing state activity” after empirical analysis on Western
Europe at the end of the 19th century. He argued that government growth is a
function of increased industrialization and economic development. Wagner stated
that during the industrialization process, as the real income per capita of a
nation increases, the share of public expenditures in total expenditures
increases. The law cited that “The advent of modern industrial society will
result in increasing political pressure for social progress and increased
allowance for social consideration by industry.” Wagner (1893) designed three
focal bases for the increased in state expenditure. Firstly, during
industrialization process, public sector activity will replace private sector
activity. State functions like administrative and protective functions will increase.
Secondly, governments needed to provide cultural and welfare services like
education, public health, old age pension or retirement insurance, food
subsidy, natural disaster aid, environmental protection programs and other
welfare functions. Thirdly, increased industrialization will bring out
technological change and large firms that tend to monopolize. Governments will
have to offset these effects by providing social and merit goods through
budgetary means.
In his
Finanzwissenschaft (1883) and Grundlegung der politischenWissenschaft (1893),
Adolf Wagner pointed out that public spending is an endogenous factor, which is
determined by the growth of national income. Hence, it is national income that
causes public expenditure. The Wagner's Law tends to be a long-run phenomenon:
the longer the timeseries, the better the economic interpretations and
statistical inferences. It was noted that these trends were to be realized
after fifty to hundred years of modern industrial society.
Peacock and Wiseman Theory of public
expenditure
In 1961, Peacock and
Wiseman elicited salient shaft of light about the nature of increase in public
expenditure based on their study of public expenditure in England. Peacock and
Wiseman (1967) suggested that the growth in public expenditure does not occur
in the same way that Wagner theorized. Peacock and Wiseman choose the political
propositions instead of the organic state where it is deemed that government
like to spend money, people do not like increasing taxation and the population
voting for ever-increasing social services. There may be divergence of ideas
about desirable public spending and limits of taxation but these can be
narrowed by large-scale disturbances, such as major wars. According to Peacock
and Wiseman, these disturbances will cause displacement effect, shifting public
revenue and public expenditure to new levels. Government will fall short of
revenue and there will be an upward revision of taxation. Initially, citizens
will engender displeasure but later on, will accept the verdict in times of
crisis. There will be a new level of “tax tolerance”. Individuals will now
accept new taxation levels, previously thought to be intolerable. Furthermore,
the public expect the state to heal up the economy and adjust to the new social
ideas, or otherwise, there will be the inspection effect.
Peacock and Wiseman
viewed the period of displacement as reducing barriers that protect local
autonomy and increasing the concentration power over public expenditure to the
Central government. During the process of public expenditure centralization,
the role of state activities tend to grew larger and larger. This can be
referred to the concentration process of increasing public sector activities.
Nowadays, the growth in public expenditure has become a compulsion and thus,
the disturbance situations matter little.
The Classical versus
the Keynesian approach of public expenditure The classical economists believe that the
government intervention brings more harm than good to an economy and that the
private sector should carry out most of the activities. In his Welfare of
Nations, Adam Smith (1776) advocated much on the “laissez-faire” economy where
the profit motive was to be the main cause of economic developments. According
to the classical dichotomy, an increase in the total amount of money leads to a
proportionate increase in all money prices, with no change in the allocation of
resources or the level of real GDP, which is known as money neutrality. The
classical economists assumed that the economy was perfect: it is always at full
employment level, wage rate and rate of interest is self-adjusting and as a
matter of fact, the budget should always balance as savings is always equal to
investment. Since they believe that the economy was always at its full
employment level, their objective was certainly not growth.
Keynes categorized
public expenditure as an exogenous variable that can generate economic growth
instead of an endogenous phenomenon. Hereby, Keynes believed the role of the
government to be crucial as it can avoid depression by increasing aggregate
demand and thus, switching on the economy again by the multiplier effect. It is
a tool that bring stability in the short run but this need to be done
cautiously as too much of public expenditure lead to inflationary situations
while too little of it leads to
Solow growth model
In his classic 1956
article, Robert Solow proposed the study of economic growth basing itself from
a standard neoclassical production function. Neoclassical growth theory focuses
mainly on capital accumulation and savingrelated topics. Assuming there is no
technological progress, this would imply that the economy has reached the
steady-state equilibrium, where per capita income and capital are constant.
Solow found that the critical elements of GDP growth are technical progress,
increased labour supply and capital accumulation. More profound research showed
other factors as well to increase GDP growth: availability of natural resources
and human capital. As a matter of fact, the income share of human capital is
large in industrialized countries. Moreover, the result of high investment
ratio (large physical capital stock) might as well increase the GDP growth. On
the other hand, Solow residual is the change in total factor productivity which
is technical progress. In other words, it means the amount by which output
would increase as a result of improvements in methods of production, with all
inputs unchanged.
Micro Explanations of the growth of transfer payments
Attitudes to the
redistribution of income: Next, let us spend a little time thinking about
the growth of transfer payments as societies have become more affluent. In
theory, two conflicting views of the relationship between transfer payments and
increasing affluence are possible:-
a.
With increasing affluence, there should be less
need for transfers;
b.
With increasing affluence, the economy can
afford to help the less well-off more and therefore transfer payments should
increase relative to the total.
One's view of (a)
depends on the view taken of the nature of poverty and hence of the purposes of
income redistribution. One could, for example, argue that the principal aim of
redistribution is to provide a minimum level of income for people in society.
This suggests an absolute notion of poverty. Alternatively, it is possible to
argue that poverty is essentially relative and that the aim of income
redistribution should be to reduce inequalities in the distribution of income,
irrespective of the absolute levels of the incomes of the poor. If one takes
the latter view, the question of what is likely to happen to the amount of
transfer payments as an economy becomes richer depends on what happens to the
degree of inequality as the average level of income in the economy rises. The
argument for (b) depends on the notion that the marginal benefit from increases
in income falls as income rises (one could develop the idea of an
income-elastic social conscience).
There are many other
ideas concerning income redistribution. For example, one could argue that as
society grows, it becomes more interdependent and risks from unemployment, old
age, poor health etc. become greater. Society could then be given the role of
compensating for these greater risks and their impacts on individual citizens.
A variation on this would be to suggest that with increased interdependence and
increasing affluence, low income involves greater relative deprivation. Then
one could add an insurance principle: people realise that at some future time
they might be badly off and are thus prepared to pay higher taxes to support
the poor as an insurance against the risk of their becoming so.
When considering
arguments regarding transfers, one has also to consider the possibility that
growth in resource-using public expenditure may be a second-best but
politically more feasible means of redistributing income. This assumes that a
number of the major public expenditure programmes do actually involve a
redistribution of income from richer to poorer. This idea has, however, been
attacked, by Stigler amongst others. Stigler's Directors' Law suggests that
public expenditure benefits the middle class most and is paid for by the sick
and the poor.
Changing demographic
and economic structures: A number of ideas which we mentioned above in
relation to resource-using expenditures apply also to transfer payments. These
include:
a.
Demographic
structure: increased numbers of older people or of children increase (other
things being equal) the size of transfer payments. The total size of pension
payments depends also, of course, on the average age of retirement from work. A
major recent political problem in Italy has concerned the determination of the
Left to maintain existing rules which allow public sector workers to retire on
a state pension from the age of 50. The issue of retirement age is an important
one throughout Europe. Equally important, of course, is the extent to which
pensions and child benefit payments maintain their real value over time. One
possible response to growing numbers of pensioners in an economy is to allow
the real value of the pension to fall. It should be noted that there are
alternative views of the meaning of the `real value' of the State pension. One
view is that to maintain its real value the pension should be increased in line
with the general rate of inflation in the economy. The alternative view is that
pensions should increase in line with the average wage rate in the economy. A
rule based on this view would see pensions increase more rapidly and increase
the total payments to pensioners more rapidly. Supporters of this view argue,
however, that these payments would not constitute an extra burden on
wageearners since there would not need to be any increase in tax rates to pay
for the higher pensions.
The extent to which pension payments do, in fact, constitute a burden on
the current generation of wage-earners depends on the extent to which pension
payments are funded. That is, a government can act like an insurance company,
collecting a social security tax from workers and investing this money in a
fund, the interest from which would be used to pay for future pension payments.
Each generation would be paying for its own future
pensions. However, governments have in general treated taxes raised allegedly
for social security purposes as part of current revenue and have used the money
for current expenditure. Pension payments for one generation are then made from
the taxes paid by current wage-earners. There is then obviously a problem during
periods in which the proportion of pensioners in the population rises sharply.
One way out of this dilemma is to encourage or require people to take out
private pension plans. This brings us back to problems of income distribution
since unemployed and low-paid workers are unlikely to be able to afford
payments to private pension plans. The question of the balance between private
and public pensions is a major one which will be of great political importance
in the coming years.
b.
Household
structure: the increasing numbers and proportions of marriages ending in
divorce have led to an increasing number of single parent families. Such
families tend to be more heavily dependent on state benefits such as income
support and housing benefit. This is another controversial area. One outcome in
the UK has been the setting up of the Child Support Agency to try to make all
divorced parents contribute to the support of their children. Another outcome
has been a significant increase in social and political hostility towards
single parents, although the 1997 Conservative Party conference saw some
signalling of a reduction in this hostility.
c.
Economic
recession: higher unemployment leads to higher transfer payments (and to
lower tax revenue), although this also depends on the extent to which
unemployment benefits retain their real value over time and the extent to which
rules regarding entitlement to such benefits remain unchanged. This is
generally seen as a cyclical phenomenon. However, all European countries have
seen significant long-term increases in unemployment in recent decades.
Empirical Review
The role of government
involves public spending in order to maximize social welfare and various
attempts have been done to test whether these government expenditure contribute
to the economic growth rate. Since the Wagner's law suggests that economic
growth should rise with increasing public spending, tests for Wagner's law is
also relevant.
Meltzer and Richard
(1981) and Persson and Tabellini (1990) consider public choice to make the
government distribute the social benefits. They explained the growth of
government in the 18th and 19th century which increased the number of low
income voters who push for more redistributive expenditures. In their model,
they explained how the government embarked on satisfying the median voters
which generate a relationship between economic growth and public spending if
the position of the decisive voter shifts towards the lower end. When incomes
of skilled labour increases, redistribution is needed.
Barro (1989a, b) based
on the SummersHeston data (1988) to have found from a sample of 98 countries
for the period of 196085 that the growth in GDP per capita is positively
related to initial human capital and to investment and negatively related to
GDP per capita, political instability and price distortions. Barro (1990) in
another distinguished paper states that the role of the fiscal policy
(Government expenditure and taxes) along with the rate of economic growth has
been part of the literature on endogenous growth that government spending
directly affects the private production functions.
Demirbas (1999)
investigated on the presence of the Wagner's law using data for Turkey over the
period of 1950-1996. His research focuses on the existence of a long-run
relationship between public expenditure and the GNP. As a result, there was no
link between these two variables. On the other hand, Anwar et al. (1996)
examined the causality between economic growth and general government
expenditures for 88 countries over the period of 1960-92 using unit root and
cointegration techniques. They found unidirectional causality for 23 countries,
bidirectional causality for 8 countries while only 23 countries attested that
economic growth causes an increase in the role of the government to make it
grow larger in size.
Henrekson (1993)
carried out time-series analysis for Sweden using data for the period of
1861-1990 and he concluded that “we cannot find any long-run relationship
between GDP and government expenditure and we judge it to be probable that this
finding carries over to other countries as well”. Henrekson has tested the
Wagner's law using two-stage cointegration (Engle and Granger, 1987) and has
found no support for it in the case of Sweden. Furthermore, in a very alluring
paper, Henrekson (1993) questioned the validity of previous findings. He argued
that before testing for causality between public spending and economic growth,
one must make sure that the data for these variables are stationary. Otherwise,
non-stationary variables will lead to spurious results.
James and Bradley
(1996) extend the Henrekson's methodology by using errorcorrection models to
examine the GrangerCausality between government expenditure and economic
growth. He found only 6 positive relationships between the two variables from a
list of 22 countries. From the remaining countries, only one pointed out
unidirectional causality and bi-directional causality.
Hondroyiannis and
Papapetrou (1995) used the Johansen (1988) cointegration technique to test the
long-run relationship between government spending and national income for
Greece. As a result, no remarks were found to support the Wagner's law, that
is, the causality between government expenditure and rate of economic growth.
Bohl (1996) tested for evidence for Wagner's law on G-7 countries using
primarily post-World War II data. The data was integrated of order one. Except
for Canada and UK, the other countries provided no evidence on any relationship
between these two variables. When Granger causality was applied in these two
countries, it was found that real per capita income Granger caused government
size, thus, supporting the Wagner's hypothesis.
Error-correction model
was used by Payne and Ewing (1996) to test for Wagner's law on a sample of 22
randomly selected countries. Evidence of Wagner's Law is found only for
Australia, Colombia, Germany, Malaysia, Pakistan and the Philippines.
Bidirectional causality is found for India, Peru,
Sweden, Switzerland, UK, U.S., and
Venezuela, and Granger causality is absent in
Chile, Finland, Greece, Honduras, Italy and Japan. Lin (1995)
reinvestigated Murthy (1993) and used data from Mexico for the period of
1950-80 and 1950-90. There was a mixed evidence to support Wagner's law in the
1950-80 period and to reject it on the other period. Ram (1987) reported that
while some time-series studies support the Wagner's hypothesis, cross-sectional
studies lack such support. Nonetheless, Ram (1986) in a crosssectional
investigation found that government size has positive effect on economic
performance and growth and this does apply to a vast number of countries. In
another paper, Ram (1986) tested the Wagner's law for 63 countries from time
period of 1950 to 1980. It concluded as a multiplicity of results for different
countries. In one of the countries analyzed, Mauritius was one of them and it
was noted that Wagner's law does not hold for Mauritius.
Beck (1985) measured
government expenditure in real terms for the US to separate the price effect
from the total government expenditure. It showed that nominal value of
government expenditure might be misleading as it does not show the growth in
government expenditure in volume. Beck (1981) noted that a more than
proportional increase in government spending relative to GDP growth rates is
generally a post-1945 phenomenon.
Mahmood and Sohrad (1992) study and tried to explain the rise in
government expenditure at state level in the United States. Since, it is
advocated by Wagner's law that the income elasticity of demand for public goods
is greater than one, that is, public goods and services are luxuries, it is
postulated that the use of time series data and middle-income groups will be
more consistent. This was done by proper regional representation and as a result
it was proclaimed the income elasticity of demand for public goods is greater
than unity. Daniel Landau (1983) examines the relationship between the share of
government consumption expenditure in GDP and the rate of growth of real per
capita GDP by using data during the period of 1961-76 for a sample of 96
countries. The result of the study suggests a negative relationship between the
two variables above mentioned. The negative link was because of the full sample
of countries, unweighted or weighted by population, for all six periods
examined.
Saunders (1988) in a
very appealing paper set the factors behind the size and growth of public
expenditure in OECD countries between 1960 and 1980. The framework of the model
revealed that the growth in public expenditure is a function of economic,
social and political interactions. Five variables were identified and found to
be statistically significant to explain the growth of government spending.
Following several additions and removal of variables, it was found that the
growth of public expenditure is partly the cause of evolving demographic and
economic nature. Moreover, social, historical and political influences' on
public spending is debatable. Gregorious and Ghosh (2007) made use of the
heterogeneous panel data to study the impact of government expenditure on
economic growth. Their results suggest that countries with large government
expenditure tend to experience higher economic growth. Gemmell and Kneller
(2001) provide empirical evidence on the impact of fiscal policy on long-run
growth for European economy. Their study required that at least two of the
taxation/expenditure/deficit effects must be examined simultaneously and they
employ panel and time series econometric techniques, including dealing with the
endogeneity of fiscal policy. Their results indicate that while some public
investment spending impacts positively on economic growth, consumption and
social security spending have zero or negative growth effects.
Mitchell (2005)
evaluated the impact of government spending on economic performance in
developed countries. He assessed the international evidence, reviewed the
latest academic research, cited examples of countries that have significantly
reduced government spending as a share of national output and analyzed the
economic
consequences of these reforms. Regardless of the methodology
or model employed, he concluded that a large and growing government is not
conducive to better economic performance. He further argued that reducing the
size of government would lead to higher incomes and improve American's
competitiveness.
Olorunfemi, (2008)
studied the direction and strength of the relationship between public
investment and economic growth in Nigeria, using time series data from 1975 to
2004 and observed that public expenditure impacted positively on economic
growth and that there was no link between gross fixed capital formation and
Gross Domestic Product. He averred that from disaggregated analysis, the result
reveal that only 37.1% of government expenditure is devoted to capital
expenditure while 62.9% share is to current expenditure. Olopade and Olepade
(2010) assess how fiscal and monetary policies influence economic growth and
development. The essence of their study was to determine the components of
government expenditure that enhance growth and development, identify those that
do not and recommend those that should be cut or reduce to the barest minimum.
The study employs an analytic framework based on economic models, statistical
methods encompassing trends analysis and simple regression. They find no
significant relationship between most of the components of expenditure and
economic growth.
Methodology
The study used Ex-post
facto research design and applied time series econometrics technique to examine
the long and short run effects of public expenditure on economic growth in
Nigeria. To examine the effect of
public expenditure in Education on economic growth in Nigeria, we adopt the
Simple Linear Regression Model. This model therefore estimates that:
GDP = f (Ede,)…………………………(1)
The above model was
modified and estimated as follows:
Yt = β0 + β1EDe + μt…………………….. (2)
Where Yt = Dependent
Variable (GDP). EDe = Total Educational Expenditure β0 = Represents the
constant or intercept on Y axis.
β1= Is the
Regression co-efficient.
μt= Error or
disturbance term.
The equation above can
be restated to carry its parameters.
Data Presentation and Analysis
Having specified the model in the
above sub-section, it is hereby estimated and presented. In the model
structured, the variables used are annual time series data spinning from
1990-2014. The challenging aim of this study is to identify the individual
significance of the considered variable in the model specified in the previous
sub-section. Therefore the empirical data associated with this and related
statistics/regression results are as stated below:
Regression Result on the effect of total government expenditure in
education on Gross Domestic Product (GDP)
The general aim of
this study is to identify the effect of total government expenditure in
education on Gross Domestic Product (GDP). Therefore the empirical data
estimates associated with this regression results are as stated below:
Method: Least Squares
Sample: 1990-2015
|
Table 1: Regression of
(GDP) on (Ede) Dependent Variable: (GDP)
|
No of observation 25
R 2= 0.761480
Source: E-views 4.1
The equation in the
second model regressed GDP on EDe. The coefficient of the constant term is
9.565. The sign borne by the regression coefficient of constant is positive.
This implies that holding the independent variable, the GDP increases. The
regression coefficient of EDe carries positive sign and its t-value (6.544) is
statistically significant at 5% level. This implies that EDe affects the GDP
significantly. The t-value for the regression coefficient of EDe is significant
as confirmed by the t-probability (0.0000). It is estimated from the result
that 1% increase in LOG(EDe), on the average, will lead to 0.30% increase in
LOG(GDP). The computed value of R2 = 0.761480 shows that 76.14% of the
total variation in the Gross Domestic Product (GDP) is accounted for by the
explanatory variable (EDe) while 23.86% of the total variation in GDP is
attributable to influence of other variables which are not included in the
regression model. This means that the
regression coefficient of EDe is 6.544 and its Pvalue is
0.0000. Since the P-value (0.0000) < 0.05 (5% level of significance), we
reject the null hypothesis and conclude that the level of total education
expenditure has significantly effected on economic growth in Nigeria.
Conclusions and
Recommendations From this study, it
was found that total government expenditure on education (EDe) has significant
effect on Gross Domestic Product (GDP). In this case, EDe is a true parameter
of measuring economic growth. The finding made is confirmed by the p-value of the
regression coefficient of EDe which is 0.0000. Obviously, this value is less
than the 0.05 (5%) level of significance. It is found from the result that 1%
increase in total government expenditure on education (EDe), will bring about
an approximate increase by 0.4% increase in GDP. It is observed from this
result that when government increases her
expenditure on education, human skills will be enhanced and
this will eventually lead to economic growth in Nigeria. It is also found that
total government expenditure on education (EDe) accounts for 76.14% of the
total variation in the dependent variable (GDP).
However, only about 2%
and 3% of total government revenue and oil revenue was spent on education
between 1981 and 2006. The fact that proportionate volume of government finance
is not directed at human capital development in the Nigeria is evident by the
fact that education expenditure takes less share of government's revenue.
In the light of the
researchers' findings, the following recommendations are proffered:
1.
Government should ensure proper implementation
of educational
expenditure in order to meet set goals and targets.
2.
Monitoring and control of public spending in the
educational sector. The budgetary allocation for educational sector should be
increased and well implemented.
3.
Government should ensure that capital
expenditure and recurrent expenditure are properly managed in a manner that it
will raise the nation's production capacity.
4.
Government should direct its expenditure towards
the productive sectors like education as it would reduce the cost of doing
business as well as raise the standard living of poor people in the country.
5.
Effort should be made to increase government
funding on education to curtail the level of strike in our education sector and
as well increase funding on anti-graft or anti-corruption agencies like the
Economic and Financial Crime Commission (EFCC), and the Independent Corrupt
Practices
Commission (ICPC) in order to arrest and penalize those
who divert and embezzle funds.
References
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“Government Expenditure and Economic Growth in Nigeria,
1970-2008: A Disaggregated Analysis”,
Business and Economic Journal, 4(3):
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