1.1    Background of the Study

The relationship between government expenditure in the educational sector and economic growth has continued to generate series of debates among scholars. With its large reserves of human and natural resources, Nigeria has the potential to build a prosperous economy, reduce poverty significantly, and provide health education and infrastructural services that is population needs.

Nevertheless, despite the country’s relative oil wealth, poverty is widespread, and Nigeria’s basic social indicators place it among the twenty poorest countries in the world (World Bank, 2004). In addition, many Nigerians have continued to wallow in abject poverty, while more than  50 percent live on less than US$1 per day. Dilapidated infrastructure (especially roads and power supply) in Nigeria is everywhere is visible sign which has led to the collapse of many industries, and has resulted in high level of unemployment. Moreover, macroeconomic indicators like balance of payments, import obligations, inflation rate, exchange rate, and national savings reveal that Nigeria has not fared well in the last couple of years (CBN, 2009).

Although, incidence of poverty in Nigeria is much higher in rural areas tan in urban centers, the urban slum-dwellers form one of the more deprived groups in Nigeria. The poor are those who are unable to obtain an adequate income, find a state job, own property or maintain healthy living.

The recent revival of interest in growth theory has also revived interest among researchers in verifying  and understanding the linkages between government spending and economic growth especially in a developing country like Nigeria. Over past decades, public sector spending has been increasing in geometric terms through government various activities and interactions with its Ministries Department and Agencies (MDA’s) (Niloy, 2003). Although, the general view is that public expenditure either recurrent or capital expenditure, notably on social economic infrastructure can be growth-enhancing, the financing of such expenditure to provide essential infrastructural facilities including transport, electricity, telecommunications, water and sanitation, waste disposal, education and health can be growth-retarding (for example, the negative effect associated with taxation and excessive debt). The size and structure of public expenditure will determine the pattern and form of growth in output of the economy. The structure of Nigerian public expenditure can broadly be categorized into capital and recurrent expenditure. The recurrent expenditure are government expenses on capital projects like roads, airports, education, telecommunication, electricity generation etc., are referred to as capital expenditure. One of the main purposes of government spending is to provide infrastructural facilities.

The effect of government spending on economic growth is still an unresolved issue theoretically as well as empirically. Although the theoretical positions on the subject are quite diverse, the conventional wisdom is that a large government spending is a source of economic instability or stagnation. Empirical research, however, does not conclusively support the conventional wisdom. A few studies report positive and significant relation between government spending and economic growth while several others find significantly negative or no relation between an increase in government spending and growth in real output.

An extensive review of literature, presented in the next section , clearly indicates that empirical evidence on the effect of government spending on economic growth is at best mixed.


1.2    Statement of the Problem

Policy makers are divided as to whether government expansion helps or hinders economic growth. Advocates of bigger government spending argue that government programs provide valuable “public goods” such as education and infrastructure. They also claim that increases in education spending can bolster economic growth by putting money into people’s pocket. Proponents of smaller government have the view.

Furthermore, in a growing economy, government spending can be curtailed, the government sector can revert to a lower level of spending and personnel can be redirected to the business sector. However, while budgetary expansion is easy in a recession, cut-backs during economic heights are very difficult. No minister or director of a public institution relinquishes control, authority and budgets easily.

1.3    Objective of the study

The general objectives of the study is to determine how empirical investigation influence government spending on economic growth.

The specific objectives are to:

  1. Examine the impact of government expenditure on education on the economic growth of Nigeria
  2. Evaluate the impact of government expenditure on health on the economic growth
  • Ascertain the impact of government expenditure on power on the economic growth.

1.4Research Questions

The research work shall be guided by the following research questions:

  1. Does government expenditure on education have any impact on the economy?
  2. What are the impacts of government expenditure on health on the economic growth of Nigeria?
  • Does government expenditure on power really have any impact on the economy?

1.5       Hypothesis of the Study:

H01:     Government expenditure on education has no significant impact on economic growth of Nigeria

H02:     Government expenditure on health has no significant impact on economic growth of Nigeria

H03:     Government expenditure on power has no significant impact on economic growth of Nigeria

1.6    Significance of the Study

The importance of empirical investigation of the impact of government education spending on economic growth cannot be overemphasized. However, the study would be helpful in improving the level of education in the country. The study would be beneficial to government and policy maker in their determination and formulation of effective macro-economic policies on developmental issues. Students and researchers would find this study valuable in their future scholarly research. This study equally, would further add to the existing literature on the analysis of the impact of government education spending on economic growth in Nigeria in particular and the world in general.

1.7    Scope of the Study

This study covers a period of forty-three (43) years. This period of study is remarkable for its major economic thrusts in Nigeria economic and political development. For instance, it was during this time that the indigenization decree of 1972 and its subsequent amendment in 1977 were promulgated. These introduced changes in the ownership structures of the country’s private and public sector industries and carried with them serious implications for the nation’s industrial progress. The establishment of Universal Free Primary Education on 6th September, 1976 which was embedded in National Policy of Education of 1977 and later re-launched in 1999, was intended to improve empirical investigation development in Nigeria.