GOVERNMENT EXPENDITURE AND POVERTY REDUCTION IN NIGERIA

ABSTRACT

This study empirically examined government expenditure and poverty reduction in Nigeria from 1981-2018. Being a time series data, and to avoid spurious regression result in our model, a test for stationary of the data using Augmented Dickey-Fuller unit root test was carried out. The variables; Per Capita Income, Government Expenditure, Industrial Output, Money Supply, Interest Rate and Nominal Exchange Rate were found to be stationary at their first difference. Then Johansen co-integration technique was used to establish if the stationary variables are co-integrated in the long-run. The Trace statistic and the Max-Eigen values indicates that all the variables were found to be co-integrated in the long run. Further, ECM was employed to correct for any form of dis-equilibrium in the short run. The ECM result revealed that government expenditure (negative impact), industrial output (positive impact), Money supply (positive impact), and interest rate (positive impact) exerts a significant influence on poverty reduction. While nominal exchange rate (negative impact) was found to be insignificantly related to poverty reduction in Nigeria. The study recommends that the health sector should be given a larger budgetary allocation and support as the current government expenditure on health and education is not making any significant impact. The study therefore concludes that there is need to fine-tune various fiscal and monetary policies which would provide the enabling environment for private investment to complement government investment vis-à-vis employment generation and poverty reduction in Nigeria.

Keywords: Per Capita Income, Poverty Reduction, Government Expenditure.