EFFECT OF GOVERNMENT EXPENDITURE, UNEMPLOYMENT AND POVERTY RATE ON ECONOMIC GROWTH IN NIGERIA 1988–2018.

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ABSTRACT

This study examined the effect of government expenditure, unemployment and poverty rate on economic growth in Nigeria from the period of 1988 – 2018. In order to achieve these objectives, the study employed the econometric technique of Ordinary Least Square (OLS) in analyzing time series data from 1988 – 2018. The secondary data used for this research work was obtained from the report of Central Bank of Nigeria (CBN) and that of the National Bureau of Statistic (NBS). The results of our finding revealed that government expenditure has a significant effect which can be able to minimize unemployment and poverty in the country and thereby increases economic growth. Based on the results of this finding, it is therefore recommended that the government (local, state and federal government) should direct more funds on capital projects so as to boost domestic production and attract foreign direct investments which will help in minimizing unemployment and poverty in the country.

TABLE OF CONTENTS
Title page – – – – – – – – – – i
Declaration – – – – – – – – – – ii
Certification – – – – – – – – – – iii
Dedication – – – – – – – – – – iv
Acknowledgements – – – – – – – – – v
Table of contents – – – – – – – – – vi
List of tables – – – – – – – – – ix
Abstract – – – – – – – – – x
CHAPTER ONE: INTRODUCTION
Background to the Study – – – – – – – 1
1.2 Statement of the Problem – – – – – – – 5
1.3 Objectives of the Study – – – – – – – 6
1.4 Research Hypotheses – – – – – – – 7
1.5 Significance of the Study – – – – – – – 7
1.6 Scope of the study – – – – – – – 8
1.7 Limitations of the Study – – – – – – – 8
1.8 Organization of the Study – – – – – – – 9
1.9 Definition of Terms – – – – – – – 9
CHAPTER TWO: LITERATURE REVIEW
2.1 Conceptual Framework – – – – – – – 11
2.1.1 Concept of Government Expenditure – – – – – 11
2.1.2 Concept of Unemployment – – – – – – – 12
2.1.3 Concept of Poverty – – – – – – – 14
2.1.4 Poverty Profile in Nigeria – – – – – – – 15
2.1.5 Public Expenditure Trends in Nigeria – – – – – – 16
2.1.6 Trend of Unemployment in Nigeria – – – – – – 18
2.1.7 Indicators of Poverty – – – – – – – 19
2.1.8 Poverty Alleviation Approaches – – – – – – 20
2.1.9 Poverty and Unemployment – – – – – – – 21
2.1.10 Concept of Economic Growth – – – – – – 22
2.1.11 Relationship between Government Expenditure, Unemployment and Poverty 23
2.2 Theoretical Framework – – – – – – – 24
2.2.1 Theories of Government Expenditure – – – – – 24
2.2.2 Theories of Unemployment – – – – – – – 26
2.2.3 Theories of poverty – – – – – – – 28
2.2.4 Theories of Economic Growth – – – – – – 31
2.3 Empirical Literature – – – – – – – 33
2.4 Justification of Literature Review – – – – – – 38
CHAPTER THREE: RESEARCH METHODOLOGY
3.1 Research Design – – – – – – – 40
3.2 Nature and Source of Data – – – – – – – 40
3.3 Model Specification – – – – – – – 41
3.4 Variables in the Model – – – – – – – 42
3.5 Techniques of Data Analysis – – – – – – – 43
3.5.1 Data Estimation and Evaluation Techniques/ Criteria – – – 44
CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND RESULT
4.1 Data Presentation – – – – – – – – 46
4.2 Result presentation and Interpretation – – – – – 47
4.4 Hypotheses Testing – – – – – – – – 53
4.5 Discussion of Major Findings – – – – – – 54
CHAPTER FIVE: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.1 Summary of Findings – – – – – – – 56
5.2 Conclusion – – – – – – – – 57
5.3 Recommendations – – – – – – – – 57
References – – – – – – – – 59
Appendix I – – – – – – – – 62
Appendix II – – – – – – – – 63


LIST OF TABLES
Table 1: Data Presentation – – – – – – 46
Table 2: Ordinary Least Square result – – – – – – 48

CHAPTER ONE

INTRODUCTION

Background to the Study

One of the major macroeconomic goals in any country of the world is to reduce unemployment to the barest minimum. Others include; sustained economic growth, a healthy balance of payment position and price stability. One of the major policies for achieving this is fiscal policy. Thus, fiscal policy involves the use of government collected taxes and expenditure to influence the level of economic activities in an economy. This policy is used to reduce variations in aggregate spending which are important causes of fluctuations in economic activity in the midst of intricate economic development problems such as unemployment which lead to poverty. Therefore, the primary goal of fiscal policy is to achieve a reduction in unemployment level. Thus, appropriate policy to address high rate of unemployment in any economy becomes necessary given that high rate of unemployment and poverty is an indicator of an underdeveloped economy.
On the other hand, achieving price stability, minimizing unemployment as well as poverty reduction are parts of macroeconomic objectives. According to Aminu, Manu and Salihu (2013), unemployment is often defined by classical economists as the excess supply of labour over the demand for labour caused by adjustment in real wage. Classical or real wage unemployment occurs when real wages for jobs are set above the market clearing level, causing a number of job-seekers to be more than the available vacancies.
Unemployment was defined by the International Labour Organization (1982) as comprising all the persons above a specified age who during the reference period were: Without work, that is, were not in paid employment or self-employment during the reference period. They are currently available for work, that is were available for paid employment during the reference period; and are seeking work, that is, has taken specific steps in a specified period to seek paid employment or self-employment. The specified steps may include registration at a public or private employment exchange: application to employers; checking at worksites, factory gates, markets or other assembly places, placing or answering newspaper advertisements; seeking the assistance of friends or relatives; looking for land, building, machinery or equipment to establish own enterprises, arranging for financial resources; applying for permit and license e.t.c.

In the same vein, Poverty which is brought by unemployment is the state of being in lack. It is the inability to meet basic needs. Poverty is also the inadequacy of resources which are essential to meet basic human and economic needs. Poverty is evident in various ways which include among others, lack of income, inadequate food supply, lack of, or no access to education and other essential amenities, shortage or unavailability of productive resources for sustainable livelihood, malnutrition, ill-health, homelessness (Ijaiya et al. 2011). Traditionally, the concept of poverty is viewed in terms of insufficient income required to meet basic human necessities of life, like food, clothing, shelter and other productive resources. However, the multi-dimensional nature of the concept of poverty has revealed that poverty is more in-depth than lack of essential amenities. Poverty is multidimensional, it is lack of development. World Bank (2002) also stated that poverty is hunger, it is lack of shelter, it is being sick and unable to visit the hospital to see a doctor, It also connotes no or limited access to school, and not knowing how to read, It is joblessness, and fear for the future, living one day at a time. Poverty is a disaster.
The poor also lack participation in decision making in social and cultural life and the society as a whole. Poverty can also mean a state of being extremely poor, insufficient in amount, and inferior in quality. (World Bank 1990, United Nations 1995), hence, being poor limits ones’ say in public. However, the widespread of poverty as a concept is not fully understood. Conventionally, before globalisation, earnings below a minimum level of living were referred to as poverty. The poor were seen as people who fell below a certain level of income, but the advent of globalization reviewed this overarching measure of poverty, recent statistics categorized people living on less than a dollar (US$1) per day as being ”Extremely Poor”, while those less than 2 dollars (US$2) per day as being “Poor”. Hence, income poverty does not adequately reflect poverty as it is widely understood.
By definition, public or government expenditure is the expenditure incurred by public authorities like central, state and local governments to satisfy the collective social wants of the people, (Grenade and Wright, 2012). According to Akrani (2011), public expenditure policy not only accelerates economic growth and promotes employment opportunities but also plays a useful role in reducing poverty and inequalities in income distribution in developing countries.

For the purpose of this research work, government expenditure will be looked at from capital government and recurrent government expenditure. Niloy, Emmanuel and Osborn (2003) defined capital expenditures as those government expenditures that involve capital projects which includes education, telecommunications, electricity, roads, airports, etc; while recurrent government expenditures involve public expenses on administration (wages, interest on loans, salaries, maintenance etc).
Anyafor (1990), states that public expenditure refers broadly to expenditure made by local, state and national government and agencies distinct from those of private individual organization or firm. He also states that recurrent expenditures are government expenditures made or repeatedly from year to year and capital expenditures are expenditures on new construction, land extensions and acquisition of any other fixed assets.
From the above definitions, it is therefore very important that the government should exert efficient and effective efforts in actualizing the main objectives of capital expenditure which reduces unemployment rate more than any other instrument. And the success of reducing unemployment rate will certainly lead to a better standard of living and reduce poverty rate in the economy. According to www.nigeriaunemloyment (2010), the primary cause of unemployment and poverty in Nigeria was years of negligence and adverse policies which has led to under-utilization of the diverse resources that Nigeria is endowed with. It also said that unemployment in Nigeria is a major problem both economically and socially which has resulted in more and more people who do not have purchasing power.
Although Government has been making efforts to fight unemployment through policy mixes, yet it looks as if nothing is been done. Government efforts could be seen from high increase in government expenditures, job creation programmes and initiatives such as National Directorate of Employment (NDE), which was created in 1986 with the responsibility of training in skills and acquisition particularly to young school leavers. The creation of Youth Enterprise with Innovation in Nigeria (YOUWIN) in 2011 for encouraging and supporting aspiring entrepreneurial youth in Nigeria to develop and execute business ideas. The Centre for Management Development (CMD), is a Federal Government Institution for assisting small-scale industry development. The establishment of Subsidy Reinvestment and Empowerment Programme (SUREP) in 2012 was also geared at job creation etc.

EFFECT OF GOVERNMENT EXPENDITURE, UNEMPLOYMENT AND POVERTY RATE ON ECONOMIC GROWTH IN NIGERIA 1988–2018.