PUBLIC SPENDING AND POVERTY IN NIGERIA
ABSTRACT
This study examines the relationship between public spending and poverty in Nigeria, analyzing the effectiveness of government expenditures in reducing poverty levels. Despite significant public spending on social programs, infrastructure, and economic development, poverty remains a persistent challenge in the country. The study explores the allocation of government resources, the efficiency of public expenditures, and their impact on key poverty indicators such as income levels, employment, and access to essential services. Using empirical data and econometric analysis, the study assesses whether public spending has contributed to poverty alleviation or if inefficiencies and mismanagement hinder its effectiveness. The findings highlight the need for improved fiscal policies, transparency, and targeted social investment to enhance the impact of public spending on poverty reduction. The study concludes with policy recommendations to optimize public expenditure for sustainable economic growth and poverty alleviation in Nigeria.
CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND TO THE STUDY
Public spending represents the yearly expenditure by the federal government of a country 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 and general mismanagement of the economy in 1980’s brought the issue of poverty eradication in Nigeria. Furthermore, the flood disaster in Nigeria also 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. These activities
were all showing decreasing signs. Above all, there were 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 spreading 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 objective of its annual budget and also initiated various policy 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.
overty has been a fundamental problem theoretically and empirically. Poverty in Nigeria is both rampant and long standing. Since 1996, the poverty incidence has never been below 40% (National Bureau of Statistics, 2017). The impact government expenditure has on poverty reduction has been acknowledged from time immemorial. Government provided relief materials to the poor during the Roman Empire and Greek civilizations or what is called Antiquity. For many centuries till the beginning of the 16th Century the responsibility of poverty alleviation rested on the church and mosque mainly through charity. However, the church and the state during the times were inseparable. The modern forms of government expenditure and intervention in poverty alleviation date back to the poor relief organized by the state after the 16thcentury. These gave way to early welfare schemes that were already in place by early 19th century and the social security schemes that guide poverty reduction today (Herman, 2004). The reduction of poverty is the most difficult challenge facing any country in the developing world where on average majority of the population is considered poor. The description of Nigeria as a paradox by the World Bank (2012) has continued to be confirmed by events and official statistics in the country. The paradox is that the poverty level in Nigeria contradicts the country’s immense wealth. Evidences in Nigeria show that the number of those in poverty has continued to increase. For example, the number of those in poverty increased from 28% in 1980 to 46% in 1985, it declined slightly to 42% in 1992 but increased very sharply to 67% in 1996. Since then the poverty incidence in Nigeria has never been below 40% (NBS, 2016). In spite of the impressive economic growth over the years, unemployment and the incidence of poverty have worsened since 2004.The National Bureau of Statistics (NBS, 2017) recently released the poverty incidence figures for 2018 and 2019 for Nigeria. The figures suggest that the incidence of poverty in Nigeria worsened between 2015 and 2016 which led to the description of Nigeria as the world poverty capital. To achieve the desired macroeconomic goals, public spending via fiscal policy has been found, and widely regarded as a potent measure for enhancing growth, income redistribution and poverty reduction particularly in developing nations (Falade E. O. and Babatunde D. 2020) Another problem has been to channel public expenditure into those areas of the economy where its effects will be optimal in terms of growth, poverty reduction and distribution. With trillions of naira Nigeria spent to achieve economic growth and reduce poverty, then why are majority of Nigerians poor? Therefore, there is the need to examine whether or not public expenditures have any impact on poverty reduction in Nigeria. However, substantial volumes of empirical research based on identifying the significance of public expenditure on economic growth have been conducted in Nigeria. To the best of my knowledge only a few studies focused on government expenditure and poverty reduction in Nigeria, e.g. Olofin (2010), and Stephen (2011), Enyim (2013), Oriavwote and Ukawe (2018)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. 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
Poverty in Nigeria is multi-dimensional and has many faces as revealed by Nigerian indicators of human development such as education and health amidst spending relative to the Gross Domestic Product (GDP). Analysis of poverty in Nigeria shows inequalities in terms of educational and health indicators, and such indicators vary across regions (geopolitical zone), states, location (urban and rural), and gender (male and female). The North-East and North-West regions had the highest contribution to national poverty, while South-East had the least contribution to national poverty. Also there is high inequality in health outcomes according to household quintile which improves as household moves from a poorer quintile to a richer one. The Nigerian case shows inequalities by location, with people in the rural areas contributing 65% to national poverty, while their urban counter parts contribute35%. This reveals that poverty is more predominant in the rural sector.
Net enrolments for primary and secondary schools vary across regions and reveal gender disparity too. These two indicators favour male more than female across regions, except in the South-East where female secondary net enrolment is higher than male.
South-East region has the lowest infant and under five mortality rates but has the highest number of female-headed households.
In terms of health outcomes, rural infant mortality rate in 2007 was 121 as against 81 per every 1000 live births for urban while under five mortality rate for rural was 243 as against 153 per every 1000 live births for the urban. A look at the situation tends to
