EVALUATION OF CAPITAL AND RECURRENT EXPENDITURE PATTERNS

CHAPTER ONE

INTRODUCTION

1.1  BACKGROUND OF THE STUDY

The main aim of state creation in Nigeria has been the desire of the administration to cater for the local peculiarities and yearnings of the people.

Kogi State is highly endowed with abundant deposits of different minerals resources, which includes iron-ore, marble, clay and limestone. Also, if the convergence of River Niger and River Benue on the soil of the State capital is effectively utilized. It will help achieve the much anticipated development which the masses of Kogi State yearn for.

In this regards, the major concern of the state should be such that preference is given to capital expenditure over recurrent expenditure in her budgetary allocations. However, a trend analysis of Kogi State budget in the last four years (2010-2013) present a picture of steady, increase in capital expenditure over the recurrent expenditure is required for the even development of infrastructure in the State. In the bid to give the State a befitting outlook, much attention is not given to workers welfare in areas of annual increment, implementation of promotions and non payment of acceptable or reasonable minimum wages for civil servants, making the trend uncomfortable for workers in Kogi State civil service.

Recurrent expenditure needed in the operation and maintenance of public investment projects should be estimated so as to facilitate their provisions. Such estimate helps to ensure a connection between the capital and recurrent components of the budget, lending to borrowing economic development or macro economic management in the State. Furthermore, estimates of recurrent expenditure will contribute to the overall evaluation of investment alternatives, thereby improving project selection during the formulation of public investment programmes. Estimates of these costs should therefore be presented along with investment budget spending proposals.

The importance of estimating or evaluating recurrent expenditure is underscored by the shift in many developing countries with greater emphasis on the social sectors, public investment in these sectors give rise to high recurrent expenditure.

It is therefore the concern of this study to critically examine this trend and recommend appropriate measure that may adequately help to improve the situation.

1.2  STATEMENT OF THE PROBLEM

In spite the uneven increase in the capital expenditure over recurrent expenditure, Kogi State indigenes have not been able to feel the impact of government in form of providing them with basic infrastructures.

The state still lacks adequate water supply, good roads, networks and investment in small business opportunities in- spite of its endowment in terms of abundance of resources.

Project like the Ibaji Sugar Factory in Ibaji Local Government area of Kogi State have been abandoned midway

due to problems of infrastructural facilities that will aid the smooth operation of the project.

This has led to the problem of local and foreign investors not showing any interest in investing into Kogi State. It is due to this background, that this study is set out to analyze this trend, determine what factors are responsible for the unsteady expenditure pattern in Kogi State.

1.3  PURPOSE OF THE STUDY

The general purpose of this research work is to evaluate capital and recurrent expenditure patterns of Kogi State with reference to the annual budget of the state.

This research work is also aimed at analyzing the cause of the steady increase in the capital expenditure of Kogi State Budget in the last four years (2010-2013) without development on ground to show for it and also no improvement in the lives of the citizens.

To also point out likely problems that will be encountered in Kogi State Annual budget and the allocation patterns of expenditure in order to make recommendations where appropriate.

1.4  SIGNIFICANCE OF THE STUDY

This research work will be of great significant to;

1. The civil servant
2. The people of the state and the general administration of the state
3. Aid government decision making in implementing the annual budget
4. The financial development in all government parastatals

1.5  STATEMENT OF HYPOTHESIS

The fundamental problems of research work is the test of hypothesis about a population. Hypothesis has defined by Walpole (1979:91) ‘’assumption of statement which may be true or may not be true concerning one population it is a suggested solution to a problem under investigation. We have two types of hypothesis, these are;

1. Null hypothesis and
2. Alternative hypothesis

Ho:  There is no relationship between capital and recurrent expenditure pattern

Hi:   There is a relationship between capital and recurrent expenditure pattern

Ho:  Annual budget in Kogi State has not been translated into physical development

Hi:   Annual budget has been translated into physical development in Kogi State.

1.6  SCOPE OF THE STUDY

This research work, will concentrate on the capital and recurrent expenditure patterns of Kogi State government annual budget.

This study is limited to the Kogi State Ministry of Budget and planning.

More so, it will be restricted to the period from 2010 to 2013 annual budget of the Kogi State government.

1.7  LIMITATION OF THE STUDY

Hardly can there be a research work, no matter how good it may seem without limitations. And as such, this can not be an exception. In the process of carrying out this research work, some factors limited further work. Some of these factors are;

1. Some information and documents needed for this work were classified confidential and they were withheld.
2. The requirement of other competing academic workload and a rather tight deadline with which to be undertaken.
3. The reaction of certain respondents who refuses to give coherent answers to the questions were part of the challenges faced.
4. Secrecy: Paramount of all limitation is the inability of the researcher to lay hand on some vital information and the processes involved in getting some information at the final stage was tedious.

What was later available during the research work was nothing more than a few documents and records and also verbal explanations through personal interaction with some of the staff.

1.8  DEFINITION OF KEY CONCEPTS

For the purpose of clarity and easy understanding of this study, it is very important to define and explain some of the terms used in the course of this study.

Budget: This can be defined as a financial and quantitative statement prepared and approved prior to a defined period of time of the policy to be pursued during that period for the purpose of attaining a given objectives.

Budgetary control: This is the techniques used by management to control expenditure in relation to revenue.

Budgeting: Can be defined as the formulation of plans for future activities which when laid down carefully, determine objectives and programmes of activities, and provide yardstick by which deviation from plan achievement can be measured.

Allocation: This can be defined as the distribution of resources to various heads and subheads.

Capital expenditure: This is the expenditure meant for capital project. E.g. Construction of roads, water project and construction of institutions.

Recurrent expenditure: These are expenditure that is meant for the day to day operation of government activities. Examples salaries of civil servants.

Economic development: This can be defined as the elimination or reduction in poverty, inequality and unemployment within the complex of a growing economy.

There may be growth without economic development.

Government expenditure: This can be described as the funds required by the government to finance its activities.