Government Expenditure and Poverty Reduction in Nigeria

Abstract

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.