THE IMPACT OF GOVERNMENT EXPENDITURE ON POVERTY ALLEVIATION

ABSTRACT

This study examines the impact of government expenditure on poverty alleviation in Nigeria, focusing on how expansionary public expenditure has helped in alleviating the seemingly endemic poverty scourge from 1981-2014. The theoretical framework utilized in this study is based on the Keynesian macroeconomic framework, which assumes that any increase in government expenditure has positive and significant impact on economic growth and by implication on the level of poverty. In achieving the objectives of this study, the Co-integration and error correction methodology where employed. Results indicate that the level of government expenditures in Nigeria does not trim down the level of poverty in the country over the period of time covered by the study. Although the ECM result, which shows the speed of adjustment of the model from the short run to the long run equilibrium, is about the average, yet the economy did not show any sign of much potency in using government spending fiscal variable to tackle the menace of poverty in the country. Following the findings, the study therefore recommends the need for the establishment of a vibrant poverty alleviation programmes and strengthening the existing ones. Furthermore, rural areas should be opened up so that the rural dwellers can have access to basic needs of life and thus mitigate against the current poverty scourge.

CHAPTER ONE

INTRODUCTION

1.1     BACKGROUND TO THE STUDY

The role of government spending in promoting economic growth and poverty reduction has been intensely debated among various scholars (Aschauer, 1989; Barro, 1990; Tanzi and Zee,1997; Fan, Hazell and Thorat, 2000). Most of these studies either treat total government spending as one variable or only include one type of spending in their models, which could obscure the underlying economic dynamics by aggregation.

The importance of government expenditure in the process of human development is not only improving education also improving the health of people. Health status is conventionally measured by life expectancy at birth, and by child and infant mortality. Neither of these measures reflects the extent of morbidity. Health indicators (nutrition, mobility, morbidity and height) are positively correlated with education (Sackey, 2005; Cochrane 1986, 1988).

Yet, it has been shown that, even after taking note of low levels of these variables, "one would have expected a much higher level of human development achievement in Nigeria where oil export boosted the GOP, human development has continued to decrease since 1981 (Gupta et al, 2003). The main objective is to simulate if government expenditure on health would help to improve economic growth in Nigeria by 2015.

A fundamental paradox in Nigeria is that about two -third of the Nigerian people are poor despite living in a country with vast potential wealth (NEEDS, 2005: xiii). Poverty wears an absolute look in Nigeria· and most Africa countries. In Sudan, particularly in the Dafur area, the level of poverty is so high that millions of women, children and men have been subjected to extreme precarious existence. In the Central Republic of Congo, young men and women work as slaves in mines in exchange for daily bread.

A 1984 World Bank report stipulated that severe hunger and malnutrition now afflict more than one in four people in (Africa). The report further stated that famine has become the predominant story in contemporary Africa, [Stryker in Phyllis and 0' Meara 1986:329) The crisis in agricultural production in Africa is perhaps most portrayed by the food production per capita which has apparently declined almost continuously for over three decades.

Many African countries have tried to solve the problem of food insecurity be importing foodstuffs. These countries have had to contend with public finance crisis. A typical example is Nigeria which used the windfall from oil by the early 1980's to import almost everything that was consumed in the country. While this was being done agricultural production depleted to dangerous levels. At the same time skyrocketing increase in the prices of commodities made life an uphill task for most Nigerians, triggering a slide in their social and economic fortunes.

Recently, demands for cereals and tubers for feeding livestock and producing bio-fuel has generated food crisis in the world, with more dama9ing consequences for Africa where the poor depend mainly on cereals, roots and tubers for food. The global food crisis has added a new and critical dimension to food insecurity in Nigeria; the poor are experiencing a new level of hunger and deprivation. It has been predicted that Nigeria will not survive a severe food crisis.

One significant factor that has surfaced in all explanations of the food crisis in Africa is poverty and its relation to agricultural output. Pinstrup- Anderson, Pandya- Lorch and Rosegrant attested to this when they argued that the projections of the IFPRI that many millions of people will suffer from hunger and its debilitating consequences may be avoided if;

... we can mobilize the revolutionary developments in information technology and biotechnology for the benefit of the poor and; if we can harness the political will to adopt sound policies for eradicating poverty [Food Policy Report International Food Policy Research Institute 199:30).

It is obvious that the magnitude of food insecurity in Nigeria is closely related to the systematic policy biases of the ruling class. In this paper, we shall attempt a critical evaluation of governments' responses to poverty with a view to explaining the relationship between poverty, poor agricultural output and food insecurity, using the political economy approach.

Poverty is a multidimensional concept. However, measurements of poverty mostly focused on quantitative money-centric measurement using income and consumption, to measure whether a household can purchase a basket of goods at a given period of time (Baker and Schuler, 2004). These widely used money-centric measures however provide a false sense of poverty by ignoring the importance of homegrown food, household size and composition, unsatisfied basic needs, economic vulnerability, ownership of household. assets, dwelling characteristics and access to basic services, which can lead to an underestimation of poverty (Baker and Schuler, 2004).

As mentioned by Baker and Schuler (2004), money-centric measures also do not capture many other dimensions of poverty, especially in urban context. The environmental and health hazard is high in urban areas because of crowded living conditions. Therefore, measurement of quality of life, which commonly includes details about housing conditions, dwelling characteristics and access to basic needs, provide in-depth knowledge and understanding about the dynamic aspects of poverty. Thus, it is' important to measure the quality of life of the clients and their households who are participating in a program aimed at .reducing poverty and' improving socio-economic conditions of low-income urban households.

1.2     STATEMENT OF PROBLEM

Available data reveals that Nigeria is one of the countries of the world that has greater number of poor people. The statistics on human development and social provision further reveal that the population of Nigeria is increasingly becoming one of the poorest in the world, and that Nigeria as a whole, is in a very vulnerable position. Although, successive governments in Nigeria have at one time or the other put up a lot of poverty alleviation programmes, but surprisingly on the assumption of power in 1999, by the past government led by President Obasanjo, the World Bank's report indicated that Nigeria's Human Development Index (HDI) was only 0.416 and that about 70% of the population was vegetating below the breadline.  Some of the attempts made in the past to alleviate poverty include the establishment of the Department of Food, Roads, and Rural Infrastructure (DFFRI) with the major aims of opening up the rural areas and to improve the conditions of the vulnerable poor; this project had long been abandoned.

The establishment of National Directorate of Employment (NDE) to tackle the problem of mass unemployment. The establishment of People's Banking Nigeria (PBN) to cater for the credit needs of the less privileged Nigerians. Others included the Better Life Programme (BLP) which was gender specific. It was meant to improve the life of rural women. The programme was later replaced by Family, Support Programme (FSP). The programmes failed because the programmes were hijacked by position seeking individuals, who used most of the resources for personal aggrandizement rather than for the set objectives. Others such as National Agricultural land Development Authority (NALDA), The Strategic Grains Reserve Authority (SGRA) and the Accelerated Crop Production (ACP) were all established to improve the productive capacities of peasant farmers as well as improving their incomes and well-being. To assist in the eradication of illiteracy, which was found to be a major cause of poverty, The Nomadic and Adult Education Programmes were established. Amongst the reasons why the past poverty alleviation attempts failed were: (i) the politics of personal rule struggles of powerful and willful persons, rather than impersonal institutions, ideologies, public offices, or class interests, are fundamental in shaping political life (ii) the master and servant relationships associated with the programmes to alleviate poverty.

The problems this study intends to investigate are:

1.       The impact of government expenditure on poverty alleviation in Nigeria most especially in Lagos State.

2.       The reason why poverty alleviation programmes has not been able to reduce poverty in Nigeria.

3.       The implicit and explicit effect of government expenditure on the lives of the populace in Lagos.

1.3    OBJECTIVES OF THE STUDY

The main objective of this study include finding out whether there is any relationship between government expenditure and poverty alleviation in Lagos State. Other specific objectives include:

1.       To underpin the various challenges militating against poverty alleviation strategies of the government in Nigeria.

2.       To examine the impact of government expenditures on the lives of people in Lagos State.

1.4     STATEMENT OF RESEARCH QUESTIONS

The following research questions will guide this study:

1.       Is there a correlation between government expenditure and poverty alleviation in Lagos State?

2.       Has various challenges militating against poverty alleviation strategies of the government in Nigeria?

3.       Has government expenditure impacted on the lives of the people in Lagos State?

1.5     STATEMENT OF RESEARCH HYPOTHESES

Considering the nature of problems stated above, the following research hypothesis would be tested for rejection or acceptance.

1.   Ho: There is no significant relationship between government expenditure and poverty alleviation in Lagos State.

Hi: There is a significant relationship between government expenditure and poverty alleviation in Lagos State.

2.  Ho: The various challenges poverty alleviation strategies of government are facing does not hinder it, performance.

Hi: The various challenges poverty alleviation strategies of government are facing hinders it performance.

3.   Ho: Government expenditure has not impacted on the lives of the people in Lagos State.

Hi: Government expenditure has impacted on the lives of the people in Lagos State.

1.6     SIGNIFICANCE OF THE STUDY

The findings of this research work will be practical and the theoretical significance for the improvement of general knowledge on government expenditure and the best methods leaders can employ to get the best out of their employees and reduce poverty.

Theoretically, the findings will help refine and elaborate present knowledge on the various poverty strategies and models: Practically, the findings of the study could be useful for organizations interested in organizational success through effective poverty reduction.

In other words generalizations can be made from findings not just for Lagos State but also for other public and private organizations and the society at large.

1.7     SCOPE OF THE STUDY

This study is limited to Lagos State. The rationale behind the choice of the case study is because Lagos State is a very vital state in Nigeria been the former federal capital and currently the commercial nerve centre of Nigeria., Consequently, if there will be any" program that will be implemented in Nigeria, it must be felt first in Lagos State. Despite these limitations, however the study will provide the basic foundation required for further research.

1.8     LIMITATION OF THE STUDY

While enormous efforts have gone into this study, there are some hindrances that stand as limitation to the study. They are as follows: -

Time Constraints: This is seen as a limiting factor as other personal and academic functions demand much time coupled with short time available for the research.

Financial Constraints: Limited funds constituted a serious impediment toward the successful execution of this research work.

Another problem encountered has to do with transportation as well as logistics in the process of data collection.

1.9    ORGANIZATION OF STUDY

This research work is divided into five chapters. Chapter one is introducing the subject matter of the study stating the research problem, objectives, significance, hypothesis, scope and limitation of the study. Chapter two involves a thorough examination of the subject matter via literature review. Journals and articles that are related and relevant to the research work. Chapter three reveals the research methodology to be employed. Chapter four is used to present relevant data gathered from various sources and the analysis of these relevant data. Chapter five which is the last chapter that summarizes the research work,' inference and recommendation that are made and what action to be taken by government to tremendously reduce poverty.