THE IMPACT OF GOVERNMENT EXPENDITURE ON ECONOMIC GROWTH IN NIGERIA (1980-2010)

THE IMPACT OF GOVERNMENT EXPENDITURE ON ECONOMIC GROWTH IN NIGERIA (1980-2010)

BACKGROUND OF THE STUDY.

Government expenditure has served as a common means of using fiscal policy in many countries to achieve economic growth, expansion, development and transformation of the economic base. According to Musgrave (1989), He described public expenditure as tool used to achieve three distinct objectives which include allocation, distributive and stabilization purpose. Hence the public expenditure is a comprehensive set of expenditure policy measures designed to achieve certain set up macroeconomic goals including maintaining equilibrium between the aggregate demand and aggregate supply (IMF 1993). There are many irregularities in the country leading to public outcry and there was increasing fraud in government activities resulting from an inappropriate public finance planning and implementation mostly in Nigeria. Banks and businesses were collapsing which lead to crises in the external and internal activity of the economy. Some of the hills that caused this are corruption, indiscipline, lack of accountability which is the hallmark of the Nigerian society resulting to decrease in growth and development. Evident of unstable economic is fund in poorest wages and salary structure 2 in the world. The inter-relationship effect is low productivity, avoidable, idle time, leading to loss of trade with advanced countries that have better finished products. The consequential effect is deficit in balance of trade and payment. To this extent Sulieman (2009) observes that the size of government and also its impact on economic growth has emerged as a major fiscal management issue facing economies in transition. He notes that previous research focused mainly on the size of government in industrialised countries, (DC’s), trade dependency, the vulnerability to external shock and volatility of finance, the role and size of government become germane to adjustment and stabilization programme. Mitchel (2005) has argued that a large and growing government is not conducive to better economic performance. For decades public expenditure has been expanding in Nigeria, as in other countries of the world. Akpan (2005) opines that the observed growth in public spending appears to apply to most countries regardless of their level of economic development. This necessitates the need to determine the need to determine whether the behaviour of Nigeria public expenditure and the economy can be hinged on wagner’s (1883) law of ever-increasing state activity or the Keynesian (1936) theory and Friedman (1979) or peacock and Wiseman’s (1979) hypothesis. 3 Consequently, this study dwells primarily on the expenditure side of public finance, and seeks to examine the relationship between government expenditure and economic growth in Nigeria for the period 1980 to 2010. Although this is in line with the previous empirical studies considered for the Nigeria situation. However in this work, this study employs econometric methodology after examining the fiscal factors in the link between public expenditure and economic growth.

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