Government Expenditure and Poverty Reduction in Nigeria

This research investigates the relevance of government expenditure on poverty reduction in Nigeria. The main objective is thus to investigate whether the poverty reduction efforts through government spending has actually translated into a reduction in the poverty level. The study covered the period between 1980 and 2016. The ECM model and cointegration models of the OLS as well as the granger causality techniques were used to analyze the data. The result of the ADF unit root test indicates that all the variables are I(1). The result of the Johansen cointegration indicates the existence of a long run equilibrium relationship among the variables. The result of the parsimonious ECM indicates that though the one period lag government expenditure on health has a significant and positive impact on the per capita income, it has a low elasticity. The result indicates further that government expenditure on education has a significant and positive impact on the per capita income. The result indicates further that government expenditure on building and construction has a significant and positive impact on the per capita income, the elasticity is however very low. The granger causality test result indicates no causality between government expenditure on health and education. A bicausal relationship however exists between government expenditure on education and per capita income. The result shows no causality between government expenditure on building and construction and the per capita income. The result recommends amongst others an increment and proper monitoring of government spending which could be enhanced through public private partnership.


Introduction
Poverty has a global outlook and it affects different people in different regions, continents and countries in different ways. Although no country or region is immune from poverty, the magnitude varies from country to country or from region to region (Binuyo, 2014). Global poverty has been on the decline except in some countries in Sub-Saharan Africa, Nigeria inclusive. The rate of poverty in Africa rose from 44.6 percent to 46.4 percent in the last two decade (Adigan, Awoyemi, & Omonona, 2011;Ravallion & Chen, 2004). Poverty has two dimensions. The first is moneylessness which indicates insufficient cash and inadequate resources to satisfy basic human needs secondly, it implies powerlessness. That is those without opportunities and choices (Encyclopedia Americana, 1989).
Poverty has also been defined as deficient and degraded human conditions that hinders the optimal realization of basic human needs like health, food, education, shelter and clothing. The decline in the standard of living in the developing countries including Nigeria has led to an increment in the incidence of poverty. This decline has been linked to the decline in economic growth in developing countries. The ADB (2008) noted that African countries witnessed a fall in economic growth by an average of 10.5 percent in 1985and 3.2 percent in 2007. This led to a reduction in the level of poverty from US$1600ins 1980in US$1160in 2008(ADB, 2010Mukah, Raji, & Micheal, 2011). Nigeria has recorded a reasonable growth in its GDP in most of the years since independence. The paradox is however that the growth in GDP over the years has not led to a reduction in the level of poverty in Nigeria. The level of poverty in Nigeria continue to increase even as successive governments in Nigeria, both military and civilian introduced and left behind one form of poverty alleviation programme or the other (Binuyo, 2014). This is despite the numerous programmes initiated by the Nigerian government to address the  (Osundina, Ebere, & Osundina, 2014). In dollar term, the number of Nigerians that lives below US$1 per day increased from 51.6 percent to 61.2 percent in 2010. Earth Trend (2003) noted that 70.2 percent of Nigerians live on less than US$1 a day and 90.8 percent live on less than US$2 per day. The high incidence of poverty in Nigerian is surprising giving the huge money spent by the government in reducing the menace of poverty. For example, government recurrent expenditure increased from N3819.2m in 1977 to N461,600.00m and N1,589,270.00m in 2000N461,600.00m and N1,589,270.00m in and 2007N461,600.00m and N1,589,270.00m in (Okulegu, 2013. The government capital expenditure also rose from a low of N5004.60m in 1977 to N10, 163.40m in 1980 included those on education, health, housing, electricity generation and agriculture which are supposed to directly alleviate poverty but did not translate into decline in the level of poverty in Nigeria. The economic recession was thus not unexpected. This is visible at the paucity of basic infrastructure such as good school, good medical facilities, shelter, food, etc. Aluko (2003) noted that Nigeria has greater income inequality than other African countries. It was also noted that the highest 40 percent of Nigerians earn more than 10 percent of Gross National Income with the remaining 60 percent going to 90 percent of the population. This casts doubts on the poverty reduction efforts by the government.
The objective of the study is thus to investigate whether the poverty reduction efforts through government spending has actually translated into a reduction in the poverty level in Nigeria. The sub-objectives include:  To examine the relationship between government expenditure on health and poverty level;  to ascertain the impact of government spending on education on the poverty level and  to establish the link between government expenditure on building and construction and poverty level.
Other than this introductory section, the rest of the paper is made of four sections. The second section is on the literature review while the third section is on the materials and methods. The fourth section is on the results and findings and the last section borders on the conclusion and recommendations.

Literature Review
The study adopts the endogenous growth model which states that investment in human capital, innovation and technology are important contributors to economic growth. It added that the long run growth rate of a country depends on policy initiatives such as education subsidy, increasing government spending on education and health, etc. The theory thus sees economic growth as been mostly

Materials and Methods
The model used for the study is stated below: The cointegration and Error Correction components of the Ordinary Least Squares were used in analyzing the data. The Augmented Dickey Fuller (ADF) unit root test was used to assess whether or not the variables are stationary and their order of integration. The Johansen cointegration test was used to assess the long run equilibrium relationship among the variables. This is followed by the ECM which was used to analyze the relevant elasticities.

Results and Findings
The analysis of the result commenced with the unit root test. The result of the ADF unit root test is shown in the table below:  LGEH (  income. An indication of a rejection of the null hypotheses of no causality in both cases. The result could not reject the null hypotheses of no causality from GBC to PCI and from PCI to GBC. Causality did not also exist between GED and GEH and between GBC and GED.

Conclusion and Recommendations
Drawing from the endogenous growth model, the study investigates the impact of government expenditure on the level of poverty in Nigeria. The cointegration and ECM component of the OLS were used. The result concludes that although government expenditure on health has a significant impact on per capita income, the low elasticity indicates that government spending on the health sector has been unable to significantly reduce the level of poverty in Nigeria. The result indicates that if well managed, government spending on the education sector has the potentials of reducing the level of poverty in Nigeria. The result concludes that government spending programme on building and construction did not have the expected impact on poverty reduction. The result concludes that government expenditure on health matters for poverty reduction in Nigeria. The result recommends that government should increase her spending on the health sector as this will reduce the level of poverty through an increase in per capita income which is a product of healthy labour force. The government should increase and properly monitor her spending on the education sector. This is important since the education sector has a direct impact on the reduction of poverty by reducing the proportion of per capita income spent on education. The government should partner with the private sector to complement her building and construction spending. This will also reduce the level of poverty and could prevent future economic recessions.