Governmental expenditure and National development  of Nigeria, 1990-2020: an empirical review

1. Introduction

The dogmatic belief that government should maintain law and order in order to promote society progress rather than interfere with economic growth was debunked with the advent of Neo-classical philosophy. This was the case up until the classical theory’s inability to allocate resources fairly resulted in the application of John Keynes’s Neo-classical principles. The primary argument put out by neo-classical theorists is that the government ought to become involved in the economy by providing monetary interventions to stimulate growth and help the country emerge from the Great Depression. As a result, many governments have expressed interest in their nations’ economic development and prosperity by allocating funds to raise the standard of living for their inhabitants in the areas of transportation, education, health, and agriculture.

Agbarakwe and Anowor (2018) state that the classical apologists believed that the long-term management of the economy should rest with the forces of supply and demand, and that the government should not meddle in economic matters. The classical thinkers proposed a theory according to which the government should only uphold law and order and should not interfere with the market mechanism’s ability to function. Governments work hard to make sure that their citizens and residents have a comfortable life. This is especially true in the West, where the government provides basic necessities like high-quality, affordable housing, improved health care, agriculture, a well-developed road network, and so on. However, most third-world countries lack these efforts due to obvious factors like institutional weakness and the prevalence of corruption. Governments work hard to make sure that their citizens and residents have a comfortable life. This is especially true in the West, where the government provides basic necessities like high-quality, affordable housing, improved health care, agriculture, a well-developed road network, and so on. However, most third-world countries lack these efforts due to obvious factors like institutional weakness and the prevalence of corruption. Agbarakwe and Anowor (2018) claim that by assuming that the market would supply all necessary resources, the governments of the majority of third-world nations appeared to have endorsed the theory of the classical economics. It is clear that Nigeria’s administration adopted the ideas of classical economists by letting supply and demand dictate the requirements of the populace, which ultimately resulted in the monoculture of the nation.

Nonetheless, studies have shown a strong correlation between government spending and economic expansion. Keynes stated in 1936 that lowering interest rates and increasing government capital investment in infrastructure would encourage businesses to invest and be the cure-all for the economic crisis. Keynes (1936), Ram (1986), Ranjan and Shanma (2008), and Barro (1990) are among the academics who have claimed that more government spending on socioeconomic development promotes economic growth. According to them, an increase in government expenditure on things like health and education will lower production costs and boost labor productivity, which will boost firm profits and private sector investment and ultimately raise the country’s gross domestic product.

Even though the country’s successive governments have tried to diversify the nation in accordance with Western demands, this idea has not produced any fruitful outcomes because Nigerian leaders are inherently corrupt and have not advanced socioeconomic development sufficiently to foster the kind of robust growth required for the nation’s development. Nigeria, according to Akpakpan (1998), was dependent on imports from other nations, particularly petroleum and agricultural supplies, for which she paid a premium. Thus, according to Akpakpan, the government had to launch intervention programs that will support Nigeria’s achievement of strong economic growth. The government intervened in the economy by launching programs under the Sustainable Development Goals (SDGs), such as the Cash Transfer Program, the Women’s Entrepreneurship Development Scheme, the School Feeding Initiative, and the Small Business Growth Program, to mention a few. These programs will foster real socio-economic development by giving citizens the necessary funds to launch profitable ventures that will raise their standard of living and assist the government in improving transportation, agriculture, education, and other areas that will spur economic growth. However, in spite of this, Nigeria has not experienced reasonable economic growth that will redistribute resources among its citizens.

The disparity between the rich and the poor continues to grow as a large number of Nigerians live in extreme poverty in comparison to the few wealthy Nigerians, who are primarily politicians. According to Vanguard (2021), The 2019/2020 Nigerian Living Standards Survey was released by the National Bureau of Statistics (NBS). It shows that 82.9 million people, or 40.1% of the country’s population, are living in extreme poverty. According to the survey, a higher proportion of Nigerians reside in rural areas, with slightly over 40% residing in metropolitan centers. This indicates that poverty is widespread in these areas. According to Knoema (N.D.), the national poverty headcount rate was 40.1 percent in 2018. In light of this, the study looks at how the government’s socioeconomic initiatives affect Nigeria’s economic expansion.

2. Review of literature

This paper includes a conceptual review as well as an analysis of relevant empirical research on economic growth and socioeconomic intervention. This indicates that the concepts of growth and socioeconomic development are included in the conceptual literature evaluation.

In Rivers State, Nigeria, Agbarakwe and Anowor (2021) conducted a research titled “Government Intervention and Economic Development: Lessons from Songhai Development Initiative Farm.” In order to get the necessary data, it used a survey design that included questionnaires, interviews, and in-person observations. The hypothesis was also tested using chi-square. The study’s findings show a strong correlation between economic progress and the Songhai progress Initiative Farm. Therefore, it suggested that for the best results in terms of output, job creation, income, social welfare, and technical improvement, such and comparable government direct participation in the agricultural and other sectors should be encouraged. The study did not analyze its findings using the proper statistical method. Measurement of the difference, not the relationship, is done by Chi-Square. The application of Pearson Correlation will increase the study’s perceived value.

Ajide (2014) studied the factors that influence Nigeria’s economic growth. E-view was utilized in the study to analyze the findings. The study discovered that factors influencing economic growth include labor force participation, life expectancy, openness, and economic freedom. Accordingly, the research recommended cutting back on overbearing government intrusion while increasing funding for health and education. Anwana and Affia (2018) conducted a study titled Which Institutions Infrastructure Matter for Economic Growth and Development in Nigeria? We obtained time series data from the World Bank, Nigerian Central Bank, and other sources between 1986 and 2016. ECM was implemented, and a multiple regression model was used for data processing. According to the study’s findings, political, legal, and security institutions, as well as governance, have an impact on economic growth in Nigeria, whereas economic and regulatory institutions foster it. Accordingly, the study suggested that in order to maintain economic growth, the government should focus its policies on strengthening the financial, regulatory, and economic sectors of the economy; enhancing civil services and public infrastructure while shielding them from political influence; and bolstering civil liberties and the rule of law through the implementation of a strong security framework.

Ibietan (2011) conducted research on Nigeria’s agricultural and rural development policies from 1960 to the present. The study came to the conclusion that while incrementalism as a decision-making model is negative, it can help prevent policy reversals and somersaults by ensuring continuity in government policies and programs. To achieve a balance between the government and policy beneficiaries, the report suggested that the critical section and stakeholders in the policy-making process should work together. While our work examines the many efforts made by the government to ensure economic growth, the analysis is restricted to the numerous mechanisms utilized in agriculture. An evaluation of agricultural financing, policies, and initiatives for sustainable development in Nigeria in the twenty-first century: 1990–2014 was carried out by Fankun & Evbuomwan (2017). Using descriptive and inferential techniques, data for this study were collected from secondary sources, including Conference Journals and Publications, World Bank and United Nations publications, text books, Bullion, Annual Report and Statements of Accounts, Central Bank of Nigeria (CBN) Statistical Bulletins, and Bullion. The studies that were secondary were obtained through the use of descriptive and inferential techniques from the Central Bank of Nigeria (CBN) Statistical Bulletins, Annual Report and Statements of Accounts, Bullion, The Economic and Statistical Review of National Planning Commission, conferences, journals, and publications, as well as World Bank and United Nations publications and textbooks. According to the report, government support for agricultural initiatives is at a low point, making it impossible to guarantee that agriculture will contribute to sustainable development.

A study titled Nigerian Socio-Economic Development: The Roles and Challenges of Small and Medium Entreprises Development Agency of Nigeria (SMEDAN) was carried out by Adegbuyi, Kehinde, Fadeyi, and Adegbuyi (2016). To wrap up its investigation, the study used a descriptive statistic. According to the report, among other things, SMEDAN suffers difficulties with insufficient funding, nepotism, tribalism, and a lack of awareness-raising efforts. If the researchers had used survey research, the study would have been more reliable. In order to alleviate poverty in Edo State, Nigeria, Igberaese and Dania (2015) conducted study on the assessment of socio-economic characteristics of community-based organizations. The study used random and purposive sampling strategies in a survey-style research design. The study discovered that CBO establishment is unstable over time, with membership ranging from 1 to 100 individuals, the majority of whom are involved in agricultural business. Therefore, the study suggested that the government take immediate action and provide them with interventions that will raise their standard of living. The notion of poverty was not sufficiently explored in this study.

A study on Governance and the Challenge of Socio-Economic Development in Nigeria was carried out by Ojo, Aworawo, and Ifedayo (2014). According to the report, corruption has proliferated widely throughout Nigeria, impeding the establishment of good governance and, ultimately, negatively affecting the country’s socioeconomic progress. Therefore, the study suggested that if effective governance is to be implemented, Nigeria’s leadership should be corrupted. A study on The State, Governance, and Socioeconomic Development Realities in Nigeria was conducted by Ijere (2014). According to the report, corruption and poor governance are caused by ethnic chauvinism and historical accumulation in Nigeria. As a result, the report suggested that the rule of law, accountability, and openness be established.

A study titled Economic Growth in Nigeria: Evidence from the Appraisal of Financial Sector Reforms and its Causal Effects was conducted in 2014 by Manasseh, Asogwa, Agu, and Aneke. Time series data were employed in the study, and the results were analyzed using E-view. According to the report, foreign direct investment and domestic credit provided by the banking industry are two important factors that can contribute to strong economic growth. According to the report, the government could offer a tax holiday and relax strict regulations that might deter banking institutions from lending to the private sector.

A study titled Economic Development in Nigeria through the Agricultural, Manufacturing, and Mining Sectors: An Econometric Approach was carried out by Uzoigwe in 2007. Using the Engle-Yoo (1991) model, sectoral-econometric modeling was used in the study. The analysis discovered a substantial positive correlation between labor input and public capital expenditure for the growing sectors and the gross production of the manufacturing, mining, and quarrying industries. The study suggested that Nigerians choose leaders who possess a solid understanding of economic concepts.

3. Method

The study employed data from secondary sources. The information for variables like Gross Domestic Product (GDP) and Total Government Expenditure was taken from the CBN Statistical Bulletin, 2020. This times series analysis study spans a sample period from 1990 to 2020. This study estimated the effect of government spending on the transportation sector and economic growth using multiple regression models and econometric procedures. The following is the study’s model:

Functional relationship

The above functional relationship has been transformed into econometric linear models as follows.

Where:

RGDP = Real Gross Domestic Product

SOCOM = Expenditure on Social and Community Services

ECONS = Expenditure on Economic Services

ADMIN = Expenditure on Administrative Services

U_t = Error Term.

Gujarati (2004) pointed out that time series data are anticipated to be stationary, hence the Augmented Dickey Fuller (ADF) test was employed to verify the series’ stationarity as well as the order of integration.

4. Discussion and Result

5. Conclusion and Recommendations

In line with J. Paul Dunne & Nan Tian’s (2013) findings on military expenditure, economic growth, and heterogeneity, which showed that military expenditure has a negative effect on economic growth, capital expenditures on health have a positive impact on GDP but have little relationship to economic growth. Additionally, ongoing expenditures on public safety (defense) had a negligible and negative impact on economic growth. The overall or aggregate effect of government spending on economic growth, however, is statistically significant. This finding adds support to Ukpabi Nnamdi’s (2013) empirical analysis of the relationship between government spending and economic growth, which shows that government spending promotes economic growth. The Keynesian (1936) theory of government active economic intervention through the use of diverse policy tools is further supported by this. Additionally, the research confirms Wagner’s (1813) premise of Ever Increasing State Activity because the CBN data on government spending and GDP show an increasing tendency. As a result, our analysis adds credence to the mounting body of evidence showing that government spending influences economic growth and is correlated with it. The study goes on to say that the elements of government spending that were taken into account—general administration, defense, education, and health—are crucial factors in explaining Nigeria’s economic growth and that the country’s political system has no appreciable bearing on it.

Therefore, the study recommended that the government increase funding for social and community service in order to provide citizens with high-quality, reasonably priced health and education services that include access to cutting-edge medical facilities. This will help to end medical tourism abroad and create a skilled labor force that leads a healthy lifestyle and will support the nation’s economic growth. Consequently, increasing funding for social and community services will contribute to the ability to experience sustainable economic growth. It was also suggested that additional funding be given to administrative services, particularly security. The government must ensure that the military equipment required to fight terrorism is acquired and put to use. Additionally, the government ought to cut back on funding for the national assembly in order to redirect the extra funds to the health and education sectors, all of which will significantly boost economic growth.