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THE IMPACT OF PUBLIC SPENDING ON POVERTY REDUCTION IN NIGERIA
(1980-2011)
ABSTRACT
This work was done to analyze the impact of public spending
on poverty eradication in Nigeria from (1980-2011). In this research work,
multiple regression analysis was used and five variables were used in the
empirical analysis. They are government expenditure on agriculture and water
resources (AGWR), health (HTH) education (EDU) transportation and communication
(TRCM) and Housing and environment. The data used in this research was collected
from secondary data obtained from National Bureau of Statistics (2008) (MBS),
and CBN statistical bulletin. The major findings shows that government
expenditure on health, education and transport and communication are
insignificant and a unit increase of government expenditure in these sectors
will reduce poverty level. While that of agriculture and water resources, and
housing and environment are significant and a unit increase will increase
poverty level. Recommendation were proffered based on the findings of this
research. That the government at all level should ensure that its expenditure
are channeled towards projects that will reduce poverty level in Nigeria.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY
Public spending represents the annual expenditure by the
federal government to achieve some macro-economic objectives which may include
poverty reduction, increase in national productivity and macro-economic
stability in the system.
Since the late 1980’s, an increase in public spending has
become a major instrument in Nigeria. This was attributed to the following
reasons as the major causes of an increase in government expenditure in
Nigeria. First is the dominant role of public sector in major economic activities
in Nigeria. This could be attributed to several factors among them are oil boom
of the early 1970’s, the need for reconstruction of war affected areas after
Nigerian civil war in 1970, the industrialization strategy adopted at that time
by the federal government (import substitution strategy) and the need to raise
gross domestic product (GDP).
On the other hand, the collapse of oil prices in and general
mismanagement of the economy in 1980’s brought the issue of poverty eradication
in Nigeria. Furthermore, the recent flood disaster in Nigeria has re-awakened
the fight against poverty in Nigeria. In the mid 1980s, it was observed that
the private sectors were declining in economic activities as measured by
aggregate output, industrial production, non oil exports etc. were all showing
decreasing signs. Above all, there widespread evidence of
massive poverty in the economy despite of the growing public expenditure and
fiscal deficit in the economy (library of congress country studies 1980’s).
In 1986, all major socio-economic indicators were showing
downwards which brought high rate of unemployment and decreased in purchasing
power. Poverty was spending among Nigerians especially the low income earners
and economic growth was downward sloping.
Poverty in Nigeria did not become an issue of great concern
until after the oil boom when the international oil price crashed and there was
an international economic slump. The continuous downward trend in the oil
prices in the international market increased the poverty level in Nigeria. The
over-dependency on oil revenue and inadequate efforts to mobilize funds from
non oil sources led to a serious decline in government revenue. External
reserve deteriorated, and cause huge accumulated trade arrears and thereby limiting
government effort in provision of basic amenities and social facilities.
Thus the poverty level in Nigeria continues to be on the
increased over the past few decades. The 1991 world development report (WDR)
showed that Nigeria the most populous country in Africa has a significant
number of her population categorized as poor people.
In recognition of the adverse effect of poverty in Nigeria,
federal government set up Structural Adjustment Program (SAP) to reduce over
dependency on oil and to provide food to all Nigerians. This had been followed
by the introduction of other policies such as national FADAMA programs.
Furthermore, the federal government made poverty reduction the core objectives
of its annual budget and also initiated various policies measures aimed at
promoting people’s welfare and reducing poverty in the economy.
Poverty become an issue of global dimension with nations
striving either to reduce or outright poverty in there economy. The complexity
of the phenomenon and its impacts on national economics has attracted the
attention of international organizations and agencies with government in
different nations embarking on policies aimed at reducing poverty.
Consequently, Nigerian fiscal policies especially as regard expenses in the
areas that have positive impact on the well being of the poor, have
progressively being on the increase over the years. Recently, the Imo State
government took a bold step towards poverty reduction by introducing free
education to all the indigenes of the state up to the tertiary level.
Finally, the extent to which government spending have
impacted on the well being of the people prompted this study.
1.2 STATEMENT OF THE PROBLEM
In Nigeria, poverty has been on the increase which can be
attributed to inequality existing in the economy such as corruption,
macro-economic instability and inconsistency in government policies. In an
ordinary framework, poverty is concern with absolute, modulate or relatively
standard of living or inability to attain a minimal standard of living. Poverty
is found to be at the worst in the rural areas. Which is characterized by
malnutrition lack of standard education, low life expectancy and sub-standard
housing? In attempt to alleviate these problems, three actors are observed in
the literature as being involved in any giving country. Namely; the three ties
of government (federal, state and local government), international
organizations and nongovernmental organizations (NGO’s).
1.3 RESEARCH QUESTION
i To what extent has public expenditure affected the levels
of poverty and economic growth in Nigeria?
ii What is the direction of relationship between public
expenditure and poverty reduction in Nigeria?
1.4 OBJECTIVE OF THE STUDY
In the context of this study, the following objectives will
be achieved.
i To evaluate the impact of public expenditure on poverty
reduction in Nigeria
ii To determine the direction of relationship between public
expenditure and poverty alleviation in Nigeria.
1.5 RESEARCH HYPOTHENSIS
Ho: Public expenditure has no impact poverty reduction in
Nigeria
Ho: There is no direction of relationship between public
expenditure and poverty reduction in Nigeria.
1.7 SIGNIFICANT OF THE STUDY
A research to investigate the impact and relationship between
public expenditure and poverty reduction in Nigeria occupies an important
detail which cannot be over-emphasized. The parastatas responsible for poverty
reduction in Nigeria will find this study useful as it will unveil the current
poverty profile and better strategies to alleviate them.
In the other hand, the federal government will benefit from
this because it will help them to channel public fund on the economy
judiciously.
Finally, the rural dwellers whose represent gross poverty in
Nigeria remains the most beneficiaries of this study because it will help
government to make policies that will promote their standard of living.
1.7 SCOPE AND LIMITATIONS OF THE STUDY
This study is limited to analyze the impact of public
expenditure and poverty reduction in Nigeria from 1980-2011. The choice of this
period based on the economic history. The 1980s witnessed a radical change in
Nigerian economy, which led to the introduction of structural adjustment
program (SAP). It also the period when the standard of living index fell, was
resulting in further rise in the incidence of poverty.
Furthermore, looking at how government expenditure helps in
reducing of poverty, not all sectors of the economy were used. The sectors are
those that have direct impact on people’s welfare, which include agriculture
and water resources, health, housing and environment, education, transportation
and communication.
This research work suffered some limitations because research
in economics has never been easy with the researchers. In most cases the
researcher is threaten to a number of factors such as; the mobility of involve
in this research was stressful; the time required to carry out this research
was highly limited as the researcher required time for other academic
activities.
Finally, despite of the above problems encounted, by the
special grace of God, the objective of this study will be achieved.
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