AN EMPIRICAL STUDY OF THE IMPACT OF FISCAL POLICY ON PUBLIC CONSUMPTION AND EXPENDITURE IN NIGERIA 1975 – 2005
ABSTRACT
The research seeks to test impact of fiscal policy on public consumption and expenditure in Nigeria 1975-2005. Government consumption and expenditure variables used, already divided the interest of total debt and total revenue. We find that Government Capital Expenditure is negatively related but positively related to Government Consumption Expenditure. Size was used as a control variable and the results proved that Government Capital Expenditure is a weak determinant of Government consumption Expenditure.
The goodness of fit of the model indicated that the model has a good predictive ability having used the Durbin-Watson analysis. There is no direct relationship between Government consumption Expenditure and Government Recurrent Expenditure, since an increase in Government Recurrent Expenditure ought to increase Government Consumption Expenditure.
TABLE OF CONTENTS
Title
Table of Content
Abstract
CHAPTER ONE
1.1 Introduction
1.2 Statement of the Research Problem
1.3 Objectives of the Study
1.4 Scope of the Study
1.5 Significance of the Study
1.6 Statement of Research Problem
1.7 Study Limitations
CHAPTER TWO
Literature Review
2.0 Conceptual issues
2.1 Fiscal Policy and Public consumption and Expenditure
2.2 Limitations of Fiscal Policy in controlling public Expenditure
CHAPTER THREE
3.1 Introduction
3.2 Theoretical Framework
3.3 Model Specification
3.4 Method of Data Collection
3.5 Method of Data Analysis
3.6 Problems of Data Collection
CHAPTER FOUR
4.0 Introduction
4.1 Presentation of Results
4.2 Interpretation of Results
CHAPTER FIVE
5.0 Summary of Findings
5.1 Recommendations
5.3 Conclusion
Bibliography
CHAPTER ONE
1.1 INTRODUCTION
The structure of the Nigerian economy has been involving since the nation was put together by British in the early part of this century. Prior to the second world war, the Nigerian economy was solely based on Agriculture with little emphasis on export.
After independence from the British, the economy took a spiral leap towards development. Many structures were put in place by the government of the day to turn the economy around . One of these was the Structural Adjustment Programme of 1986.
Prior to independence, the Nigerian economy was characterized by under – development, dualistic tendencies and un-organization. (Itoha, Itsede, 2003).
There has been concerned effort by various government in Nigeria to develop and regulate the economy. And one of the tools used by the government is its fiscal and monetary policies.
Monetary policy is a tool employed by government to achieve internal and external balance. It is a macroeconomic tool.
Fiscal policy involves the use of government budget to influence the level of economic activities ( Itoha, Oyefusi, Otiakhi, 2003).
For the purpose of this project, our emphasis will be on fiscal policy and it’s effect on public consumption expenditure.
Fiscal policy refers to the use by government of it’s expenditures and taxes to influence the level of aggregate demand in the economy. Government expenditure in the economy constitute an injection into the economy while taxes serves as leakages out of the flow of economic activities and Income. w.w.w.wikepedia.com/ finance.
Government expenditure in the economy has varied over the years. In the years 1975 – 1992, Government expenditure share in the country’s Gross domestic product (GDP) has been 1975 60.5%) 1978 (18.4%) 1992 (31.8%) selectively. In 1997, it was 17.6%. This low percentage in 1997 may be due to Military interference in the government.
The higher the percentage, the higher the level of public expenditure on consumption.
The fiscal policy of any country has a big role to play in public expenditure on consumption
1.2 STATEMENT OF THE RESEARCH PROBLEM;
The role of every society (developed or under-developed) is to maximize the available resources to determine societal preferences. One of the instrument used by government to achieve this purpose is the use of fiscal policy to raise revenue and determine the kind of expenditure (both on consumption and capital) to embark upon.
Consumption expenditure over the year has form part of the major outlay from government purse. Such consumption are monies spent on day to day maintenance of government (current Expenditure) – The problems that will be answered in the course of this study are:
i) What role has fiscal policy played over the years in raising fund and finance Expenditure by government.
ii) Despite the high consumption Expenditure by government , the Nigeria
Economy is still hampered with the problem of inadequate funding of the various government Ministries and Parastatals.
1.3 OBJECTIVES OF THE STUDY;
The objectives of the study is to examine the impact of fiscal policy on the public consumption expenditure in Nigeria 1975 – 2005.
The objectives of the study are;
1) To ascertain whether increase in consumption expenditure in Nigeria between 1975 to 2005 has increase to level of economic development
2) What fiscal policies have been used by the government from the period 1975 – 2005 and it’s impact on consumption expenditure by the government.
3) implementing tax collection from the public.
1.4 SCOPE OF THE STUDY:
This research work will cover a several review of the fiscal policy that has been put in place from the period of 1975 – 2005.
Other areas to be evaluated are:
i) Consumer spending patterns in the economy.
ii) The role of budgets and taxes as fiscal policies and their impact in the economy.
iii) The role of the central Bank in managing and controlling in implementing the fiscal policies.
1.5 SIGNIFICANCE OF THE STUDY:
For the past years, the researcher has scarcely, come across any literature by local authors on the subject matter. This can be attributed to the slow pace of development of the subject here inNigeria when compared with other countries. This study is therefore a contribution to knowledge and scholars.
Particularly this study would be beneficial to the fellowship group of persons and significant to the benefit derivable therefoe.
i) Students will benefit from this scholarly article because there is scarcely any local literature on the rudiments of fiscal policy and overall consumption and expenditure of the public.
ii) Corporate organization will benefit from this study as it will have a better understanding of the fiscal policy in place and how it affects it’s business.
iii) This study will be significant to the government as the government of the present day will be able to learn of the trends in fiscal policy development in the period under review and to know the best options that suits the economy . Also, the government will be able to know the spending patterns of the public.
iv) The tool authorities will benefit from this study as it will be able to determine the tool to be paid and it’s effect on the paying public taking inflation into cognizance.
v) This study if followed will lead to economic development in the sense that high fiscal deficits jack up interest rates or reduces credit to the private and public sectors of the economy. It will also lead to the implementation of a well tailored fiscal policy that will reflect the level of public expenditure in the economy.
1.6 STATEMENT OF RESEARCH PROBLEM:
In explaining the impact of fiscal policy on government consumption Expenditure, the following hypothesis have been formulated.
1) Increase in public consumption Expenditure by government bring about an increase in GDP.
2) Increase in tool revenue by government increase the level of government spending on consumption.
3) As inflation rate increase, the level of spending on consumption increases.
4) Total debt is a major determinant of government expenditure in Nigeria