The Relationship between Government Expenditure and Poverty Trends: A Study of Nigeria (1965-2014)

Abstract

The aspiration of most developing countries is to achieve industrial development, economic growth, and higher living standards for the citizens. To this end, governments all over the world rely on economic development plans and national budget to achieve this goal. While Nigeria receives huge revenue from crude oil sales receipts to finance development projects through its annual budgets, the high level of poverty suggests that there these projects even when backed by law in the budget, are not being implemented. This raises concern regarding the effectiveness of Government budget expenditure in Nigeria as it affects the economy since the level of poverty keeps increasing. This study examines the relationship and impacts of the government expenditure in general and specific sectoral expenditures on the level of poverty in Nigeria. The result reveals a significant negative relationship between total government expenditure and poverty trend based on time series data from 1965 to 2014. The relationships between poverty and specific sectoral expenditures such as education, health, agriculture and transportation and communications in the presence of control variables such as population and gdp growth rate are also identified by the time series data from 1965 to 2014. The data are analysed using multiple linear regression analysis, after using Wilhlems and Fiestas model and ADF Co-integration test to ensure stationarity and cogency of the data. The result also reveals that there is an existing significant negative relationship between poverty trend and the education, health and agriculture expenditures in Nigeria. Some of the major factors hindering the outcomes of the Nigerian government expenditure to improve the well-being of its citizen and reduce the rate of poverty in the country are population, inflation and corruption. Consequently upon the identified factors, the study recommend proper and adequate allocation of funds to sectoral activities especially education, health and agriculture. It should also focus on controlling the population growth of the country, inflation and control of corruption and designing a good implementation mechanism for government programmes and projects.