IMPACT OF PUBLIC SPENDING ON POVERTY IN NIGERIA

CHAPTER ONE

1.0 INTRODUCTION

1.1 Background of the Study

Nigeria, popularly referred to as the giant of Africa because of her endowments and riches in both human and natural resources, and also her affiliation with many powerful economies of the world, is still faced with one of the most challenging global problems –poverty.

Nigeria is still classified as economically retarded in terms of general social welfare. Over the years, it is evident that Nigeria has experienced some level of economic growth, but as a result of mismanagement of resources amongst other ills, poverty continues to thrive in the economy.

Over the years, public spending has been allocated into different sectors of the economy. Thus this has led to an increase in total budgetary allocation per annum. Despite this, there has minimal positive impact on poverty and inequality in the country; hence the galloping widening of the gap between the rich and poor which stifles the quest of the poor towards self-actualization and improved living standards (since a vast majority of them have very little funds).

According to French Economist, Esther Duflo, poverty can be controlled or even eradicated with the right policies. “All it takes is for politicians to translate research into action” implementing programs that have been shown to work.

According to Amartya Sen (1981), poverty analysis should focus on individuals’ potential to function rather than the results the individuals obtain from function. Hence government’s spending towards human capital development is one of the paths towards poverty reduction.

British Economist Keynes asserts that public spending should be increased when private spending and investment are insufficient. He explains that current spending which is expenditure on wages and raw materials and capital spending which involves physical assets likes roads, bridges, hospitals buildings and equipment go a long way toward bettering the society.

Public spending as a “tool” for suppressing poverty in Nigeria has been a very challenging issue majorly because of several political and societal vices inherent in the society. Vices like: misallocation of resources, embezzlement of funds, with corruption as the bedrock of all. This has been the key driver and propagator of poverty in Nigeria.

Government or public spending through subsidies and the likes, is primarily aimed at stimulating economic growth through harnessing and empowering members of the society regardless of the existing notion – corruption. Government or public spending is imperative to mitigating poverty in Nigeria.

1.2 Statement of the Problem

Government Expenditure is a major component of national income. This means it is very crucial to ascertaining economic growth and development in a nation. Government expenditure or public spending is important tools geared at helping members of society attain some substantial level of stability (social welfare). For example, public spending through agricultural subsidies help encourage commercial farming. In spite of this, a vast majority of people doubt the impact of public spending due to the political ills, since the poverty rates has not reduced significantly.

Despite the discrepancies, public spending still remains a very promising tool towards reducing the rate of poverty in Nigeria. Consequently, this study seeks to ascertain the impact of public spending on poverty in Nigeria.

1.3 Objective of the Study

The objective of this study is to ascertain the impact of public spending on poverty in Nigeria from 1981-2015

The specific objectives are:

·        To determine the relationship between public spending and poverty in Nigeria

·        To ascertain the impact of public spending on poverty in Nigeria

1.4 Research Questions

Based on the objective of this study, the study intends to ask the following questions:

·        What is the relationship between public spending and the poverty in Nigeria?

·        What is the impact of public spending on poverty in Nigeria?

1.5 Research Hypothesis

The researcher has formulated these hypotheses as a guide to this study.

H01: There is no significant relationship between public spending and poverty in Nigeria

H02: Public spending has no significant impact on poverty in Nigeria

1.6 Significance of the Study

Results of this study will be beneficial to individuals, firms, industries, researchers, the government and its parastatals; and also international organizations. Members of the society will have a better view and understanding of the role of public spending and its relation to poverty. Government will also be exposed to the flaws hindering poverty rate reduction and procure better policies with good implementation.

1.7 Scope of the Study         

This research seeks to evaluate the impact of public spending on poverty in Nigeria. The scope of this study will cover the periods of 1981-2015.

 1.8 Limitation of the study                            

In this research, some of the factors which affected the researcher were: time, finance, collection of data and gathering of relevant materials. The data collected is Secondary data sourced from the National Bureau of Statistics, Nigeria; The Central Bank of Nigeria.

1.9 Definition of Terms

·        Poverty: is a state or condition in which an individual or society lacks the financial resources and necessities to enjoy a minimum living standard and well-being that is generally accepted in society.

·        Absolute poverty: a condition characterized by severe deprivation of basic human needs including food, water, sanitation, shelter, clothing, health, education.

·        Relative poverty: a standard which is measured in terms of the society in which an individual lives and which therefore differs between countries and overtime.

·        Poverty line: the minimum level of income deemed adequate in a particular country.

·        Poverty trap:  a state where poverty tends to persist due to self-reinforcing mechanism.

·        Public spending: refers to the money or funds spent by the government on public services and other state controlled operations, projects and investments

·        Budget: is an estimation of revenue and expenses over a specific future period of time which is compiled and re-evaluated on a periodic basis.

·        Economic growth: is an increase in the output that an economy produces over a period of time, the minimum being two consecutive quarters.

·        Economic development: can be defined as efforts that seek to improve the economic wellbeing and quality of life for a community by creating or retaining jobs and supporting or giving incomes and the tax base.