STATISTICAL ANALYSIS OF EFFECT OF GOVERNMENT EXPENDITURES (ON EDUCATION, AGRICULTURE, TRANSPORTATION, HEALTH AND ADMINISTRATION) ON GDP IN NIGERIA

CHAPTER ONE

1.0 INTRODUCTION

1.01 BACKGROUND OF THE STUDY

Gross Domestic Product (GDP) is a monetary measure of the market value of all final goods and services produced in a period quarterly or yearly nominal GDP estimate are commonly used to determine the economic performance of a whole country or region and to make international comparisons. Every industrialized country today passed through the Agrarian era. In the fact, the industrial sector takes its roots from agricultural sector. In a developing nation, government fiscal responsibility is very central to all facets of development including agriculture. Hence agriculture is the main stay of Nigerian economy may have become a chiche. It nevertheless underscores the emphasis placed on agriculture as the engine of growth in the Nigerian economy.

A major challenge facing Nigeria is the inability to capture the financial service requirement of farmers and agrobusiness owners who constitute about 70 percent of the population. The need for government to spend in this area is justified as there is sufficient evidence to suggest that formal education makes positive contribution towards economic growth. Therefore many nation of the world developed and developing have made concerted efforts to enhance their human capital development by increasing government spending in this area. The federal government of Nigeria on a yearly basis often allocates funds to the various sectors of the economy for the overall development of the nation. Nations achieve significant development of her human resources through efficient transport system, good health care delivery system, education. Therefore, it is often necessary that economic data on these key sectors of Transport, Health, Agriculture and Education are compiled, presented and analyzed in order to take account of the development of human resources.

The volume of public spending have been increasing in Nigeria since the military regime at the slower rate relative to what is obtained in the current civil regime. Indeed, most sector would agree that there are circumstance in which lower/higher levels of government spending would be desirable on Gross Domestic Product in Nigeria. If government spending is zero, presumably, there will be very little expenditure and development of infrastructures would be very difficult. In other words, some government spending is necessary for the successful operation of the rule of law (Mitchell, 2005).

The relationship between government expenditure on Education, Agriculture, Transportation, Health and Administration on Gross Domestic Product in Nigeria has continued to generate a series of controversies. While some researchers conclude that the effect of government expenditure on Gross Domestic Product is negative and insignificant (Akpan, 2005 and Romer, 1990), others indicate that the effect is positive and the significant positive (Korman and Britimaserene, 2007; Gregorion and Ghosh, 2007). There are some other components of government expenditure that are productive while some are unproductive.

Government expenditure on Health and Education raised the productivity of labour and increased the growth of national output. Education is one of the important factors that determine the quality of labour. Government expenditure on health could lead to healthy economic growth in the sense that human capital is essential to GDP. Good investment in the form of transportantion is necessary for conveying people and goods from one place to another, while agriculture in the same form of food security is necessity for human existence but the administration which is taxation reduces the benefit of the tax payer and as such reduces the benefits associated with GDP (Barro, 1990).

Consequently due to lack of sufficient revenue, there is need to categorize productive and non-productive government expenditure in Nigeria in order to reduce the non-productive expenditure.

Lindauer and Valenchik (1992) state that government spending is used to meet a rapidly growing economic population and subsequent demographic transitions, increase in income and taste of the people in a country that had led to increase in demand for government goods and services increase in technological requirement for industrialization, increase in urbanization, increase in inflammation over time, balance in productivity growth between public and private sector and the need to address natural disasters among other things (Cited in Ijaiya et al 2003). According to World Bank (1977), government spending is influenced by the expanded roles of government which include among others, the provison of pure public goods, for example defense, law and orders property right, macroeconomic management, public health and education, protecting the poor through the provision of anti-poverty programmes and disaster relief programmes addressing externalities, for example environmental protection, provision of social insurance, co-ordinating private sector activities and redistribution of income and asset (Cited in Ijaiya, 2006).

1.02 STATEMENT OF THE PROBLEM

Over the years in Nigeria, the Federal Government have spend on the economy, from production and sales of crude oil and the increase the demand for public goods; like road, communication, power, education, health, agriculture etc but in the most cases, the intent of this spending are not realized due to some reasons like:

1.03 OBJECTIVE OF THE STUDY

The aim of this research work are;

1.04 RESEARCH QUESTION

Having known the objective of the study, the following research question were set by researcher to guide this study:

1.05 RESEARCH HYPOTHESIS

HYPOTHESIS I

H₀: There is no significant correlation between the Education,

Agriculture, Transportation, Health and Administration.

H₁: there is a significant correlation between the Education,

Agriculture, Transportation, Health and Administration.

HYPOTHESIS II

H₀: government expenditure on Agriculture, Education,

Transportation, Health and Administration has no significant

effect on GDP in Nigeria.

H₁: government expenditure on Agriculture, Education,

Transportation, Health and Administration has significant

effect on GDP in Nigeria.

HYPOTHESIS III

H₀: GDP is independent on Education, Agriculture, Transporattion,

Health and Administration.

H₁: GDP is not independent on Education, Agriculture,

Transporattion, Health and Administration.

1.06 SIGNIFICANCE OF THE STUDY

The the importance of asserssing the effect of government expenditure are quite numerous. This study is therefore important to the following groups.

Firstly, the federal government, state government etc in Nigeria will find this work important as it would guard their future spending.

Secondly, researchers will use it as a reference material in their research work on the effect of government expenditure on Education, Agriculture, Transportation, Health and Administration on GDP in Nigeria.

Thirdly, policy maker will use it as a guide in formulation of economic policies.

Finally, financial institution can use it to organize a seminar on the effect of government expenditure on Education, Agriculture, Transportation, Health and Administration on GDP in Nigeria.

1.07 SCOPE OF THE STUDY

This work covered the effect of government expenditure on Education, Agriculture, Transportation, Health and Administration on GDP within the context of Nigeria alone from 1995 – 2013.

1.08 DEFINITION OF TERMS

GOVERNMENT

Government can be defined as the group of people with the authority to govern a country or state; a particular ministry in office.

EXPENDITURE

Expenditure is the action of spending funds or the act of spending money for goods or services.

EDUCATION

Education can be defined as the process of receiving or giving systematic instruction, especially at a school or university.

AGRICULTURE

Agriculture can be defined as a science or practice of farming, including cultivation of the soil for the growing of crops and the rearing of animals to provide food, wool and other products.

TRANSPORTATION

Transportation can be defined as the action of transporting something or someone or the process of being transported.

HEALTH

Health can be defined as the state of being free from illness or injury.

ADMINISTRATION

Administration can be defined as the process or acrtivity of running a business organization etc.

GROSS DOMESTIC PRODUCT (GDP)

Gross Domestic Product can be defined as a total value of all final goods and services production in a country in a given year, equal to total consumer investment and government spending plus the value of export minus the value of import.

EFFECT

Effect can be defined as a change which is as a result or consequence of an action or other cause.

STATISTICAL ANALYSIS

Statistical Analysis can be defined as the collection, examination, organization, summarization and presentation of quantitative data. It deals with all aspect of data including the planning of data collection in terms of the design of surveys and experiments.

HYPOTHESIS

Hypothesis is a supposition or proposed explanation made on the basis of limited evidence as a starting point for further investigation.

STATISTICAL HYPOTHESIS Statistical hypothese is a method of making decision using data whether experimental or observation study (not controlled).

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