THE GROWTH OF FEDERAL GOVERNMENT EXPENDITURE IN NIGERIA, 1962 - 1995: A STRUCTURAL AND INSTITUTIONAL ANALYSIS
THE GROWTH OF FEDERAL GOVERNMENT EXPENDITURE IN NIGERIA, 1962 - 1995: A STRUCTURAL AND INSTITUTIONAL ANALYSIS
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Date
2000-09
Authors
ABUBAKAR, HALIDU IBRAHIM
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Abstract
Federal Government spending in Nigeria has grown in both absolute and
relative terms over the years but more especially since the mid-1970s. In absolute
terms, total spending increased manifold: from about N168.3 million in 1962 to
nearly N249 billion in 1995, while in relative terms it represented just about 8.0
percent of the country's GDP in 1962, but by the late 1970s, it had reached over
40.0 percent (of the GDP) The study, thus, sought among other things to locate or
determine the major sources of this phenomenal growth as well as highlight the
distinguishing features which combine to define the structure and growth profile of
public spending at the level of the Federal Government in Nigeria.
A characteristic feature which has dominated government spending over the
years is the disproportionate share of consumption or recurrent expenditure in the
overall expenditure profile. Likewise, the administrative sector, which includes
general administration, defence and internal security has over the years accounted
for the bulk of government non-debt related spending. Expenditures on key
functional sectors of economic and social services respectively, have remained quite
low and unimpressive, especially when viewed within the context of their relationship
with the GDP. Here also, another prominent feature is the rapid growth in debtrelated
(transfers) spending both in absolute and relative terms.
On the basis of the results of regression analysis based on time-series data
covering a 34 year period, (1962-1995), we established a strong and positive
relationship between the growth of total spending and the growth of the GDP, and
thus in the process confirming the relevance of Wagner's postulations on the growth
of public expenditure to the Nigerian situation. Likewise, results for sectoral
spending reveal a positive and direct relationship between sectoral spending and the
GDP. The correlation coefficient of the relationship between sectoral spending and
the GDP ranged between 0.83 and 0.94, while the income elasticity coefficients
ranged between 0.89 and 1.24. In addition, OLS procedures in conjunction with
Granger Causality test were used to test the central hypotheses of the study, that is,
the influence of both relative price effects or "Baumol" Effects, as well as recurrent
revenues on the growth of Federal Government spending. The results revealed that
relative price effects impacted positively and significantly on the growth profile of
govemment expenditure, while recurrent revenues also had on their own influenced
spending. The relationship between government revenue and its expenditures was,
however, not as strong as was expected, and it was observed that the relationship
was actually bi-directional.
Institutional factors equally had their own effect on the growth of government
spending. The general results of a simple statistical procedure adopted to
determine the extent of institutional influences confirmed that bureaucrats have
played an influential role in the growth of government spending. In particular, the
fragmented and incremental nature of budgeting in the country allowed bureaucrats
an agenda-setting role. The study also found that a combination of other
institutional factors including the over centralization of functions and responsibilities
facilitated, in large part, by the intervention of the military in the country's political
economy contributed significantly to the growth of Federal Government spending
over the years.
In concluding the study, it was observed that in order to facilitate the efficient
use of the nation's fiscal resources, there was need to pursue a conscious and
sustained public expenditure reduction programme. It was equally recommended
that a comprehensive review of the budgeting system need be conducted. Finally,
the study was of the view that government should be made smaller, more compact
and more efficient.
Description
A DISSERTATION SUBMITTED TO THE DEPARTMENT OF ECONOMICS,
FACULTY OF SOCIAL SCIENCES, AHMADU BELLO UNIVERSITY,
ZARIA IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR
THE AWARD OF DOCTOR OF PHILOSOPHY (ECONOMICS)
SEPTEMBER, 2000
Keywords
GROWTH,, FEDERAL GOVERNMENT,, EXPENDITURE,, NIGERIA,,, STRUCTURAL, INSTITUTIONAL ANALYSIS