POVERTY ALLEVIATION PROGRAMMES THROUGH GOVERNMENT EXPENDITURE

POVERTY ALLEVIATION PROGRAMMES THROUGH GOVERNMENT EXPENDITURE

The main aim of this research proposal is to investigate whether poverty alleviation programmes through government expenditure has yielded the desired results of a reduction in the poverty level.

CHAPTER ONE

INTRODUCTION

• Background of the Study

The problem of poverty in Nigeria and Africa at large has over the years been of great concern, and this has engaged the attention of international bodies, governmental and non-governmental agencies.

The traditional functions of government activities are the allocation of resources, redistribution and macro-economic stabilization. Its role is therefore significant in the functioning of an economy at all levels of development. It thus forms an integral part of the answers to the vital microeconomics questions of what and for whom to produce and even to how questions as well. Issues arising from size, structure and growth presumably reflecting the varying needs of the economy across time can be examined from the allocative and distributive functions of the public budget (Musgrave and Musgrave 1956, and Ekpo, 2003).

According to Agiobenebo, Onuchuku and Ajie (2000), the government’s traditional macroeconomics role is to stabilize the economy along with other policy instruments in a package approach. Government expenditure can, therefore, be referred to as the expenses, which the government incurs for its own maintenance and as also for the society and the economy as a whole and hence be seen as the absorption of the resource by the public sector (Anyanwu, 1997).

The public sector is defined as that portion of the national economy whereby economic and non-economic activities are under the control of and general direction of state (federal, states and local governments) from the private sector. The programming of these expenditures involves a comprehensive set of expenditure policy measures that are designed to achieve some given set of macroeconomics objectives. One of such macroeconomic objectives is that of poverty reduction. The role of the government in poverty reduction is therefore viewed on how social policy directs public expenditure. The direction of expenditure patterns do have a mitigating effect on poverty by creating the conditions that will enhance the ability of the poor to accumulate assets; facilitate the creation of institutions that will reduce the incidence of risk facing the poor; reduce the impact of negative shocks through the provision of safety nets and through the provision of infrastructure and services to the poor while considering also the incidence of the tax burden on different layers of the population as these indicate how the government considers poverty in its fiscal policies (Perotti 1993).

Much of the impact of the expenditure can then be viewed as establishing infrastructures and proper institutional framework that would impact positively on living conditions. For the economy to operate smoothly to create these conditions these facilities are usually seen to be provided by the government – here lies the crucial link between public expenditure and poverty reduction. Poverty reduction emerges as a problem of allocating scarce resources by government, to produce goods that are required by poor households and individuals although the resources can also be redistributed either through transfers and subsidies to the poor (Spicker 1999) or by ensuring that the richer strata of the population do not benefit more from government expenditure.

The World Bank in the 1990s emphasized the strengthening of capabilities of the poor and an increased focus on the non-income dimensions of poverty. Public intervention as suggested needed to follow a two-fold strategy: promoting labour-intensive growth and investment in human capital via primary health care, primary education and targeted social spending to reduce poverty, thus, avoiding a trade-off between growth and poverty reduction.

The phenomenon, dimensions and the consequences of poverty in underdeveloped countries have elicited global efforts towards reducing its effects. Consequently, the past few years have witnessed an increased effort to identify effective mechanisms for steering poverty-reduction efforts. The broad agreement around the Millennium Development Goals (MDGs), and the introduction of Poverty Reduction Strategy Papers (PRSPs) as country-driven policy documents that guide development efforts, are two of the principal initiatives. One of the main

problems faced by developing countries like Nigeria and policymakers alike relates to the translation of broad development goals into more specific policies and programmes that can deliver reductions in poverty levels. Thus, the motivation for the present study is to examine the effect of government expenditure on poverty alleviation in Nigeria between 1980 and 2017.

• Statement of the Problem

Several poverty studies in different parts of the world have been embarked upon or supported by multi-national agencies like the World Bank and its affiliates with a view to establishing the nature, depth and severity of poverty, causes of poverty and the possible intervention policies and strategies that could be used to reduce it yet not much has so far been achieved in establishing a general palliative (Ekpo and Uwatt, 2005).

From the poverty reduction outlook, the concern is not dependent on the quantum of public expenditure but with the components or structure of such spending. It is quite possible therefore that if poverty reduction is not an objective, the patterns of public expenditure may be different and the maximum growth rate could be high yet not reflected in the living standard of the people. Some scholars have postulated that rising public expenditure may have a negative effect on economic growth but it is recognized that it may also have a “crowding-in” effect that

encourages and indeed facilitates the expansion of private sector investment and therefore growth. Government activities that lead towards economic growth, creation of employment and improving wages play a crucial role in reducing poverty because if the economy is not growing especially with reasonable welfare provisions, the essence and the ability to increase public spending for poverty reduction purposes will be severely defeated and constrained.

Public expenditure programmes for poverty reduction must nevertheless include a strategy on how finances will be generated to fund the programme. This is to prevent the emergence of large budget deficits that will create economic instability and dampen economic growth hence there is the need to ensure that the total expenditure is consistent with macroeconomic targets while identifying the sources of funding for the expenditures and be able to allocate the resources so as to have the maximum impact on poverty reduction given the budget constraint but the issues lie in finding out what needs to be done in order that national policy and expenditure priorities should take a more pro-poor direction. Other issues involved relates to:

1. the quality of diagnosis of the poverty situation;
2. the consistency of the budget allocation and implementing processes and the proposed policies, with this diagnosis; and

iii. the degree of commitment of the authorities to mechanisms opened up to influence on behalf of the poor and hold themselves accountable to the domestic constituencies for actual performance.

Despite Nigeria’s oil wealth and vast resources, poverty is widespread in the country. The 2010 Rural Poverty Portal for Nigeria revealed that the country had been considered as one of the 20 poorest countries in the world.

The 2011 Central Bank of Nigeria (CBN) economic and financial review and the National Bureau of Statistics (NBS, 2012) report depicts that about seventy (70) per cent of the population is classified as poor with about forty (40) per cent living in absolute poverty.

Due to increasing poverty level in the country, many people suffer from deprivations, insufficient food, illiteracy, distress, inadequate shelter, diseases, lack of remunerative employment, exploitation and insecurity of lives and property. The urban poor has to contend with overcrowding, contaminated water and poor sanitation facilities. This could add to the number of criminal activities such as official corruption, robbery, prostitution, kidnapping, assassinations and dealing in illegal goods and services and suicide.

In the last decade, government expenditure has increased tremendously; the expectations had been that if government expenditure rises, there would be a commensurate rise in government provision – recurrent and capital.

Nigeria emerged as the country with the highest number of poor people, making Nigeria the world poverty capital (Brookings Report, 2018).

Drawing from Wagner (1917), it is expected that increased spending would have led to increased infrastructure provision by the government as well as improvement in other economic indicators including social amenities and citizens welfare. This indicates that something is definitely wrong either with the way government expands budget or there is outright misappropriation or in the ways and manners it has always been computed or implemented. Thus, some pertinent questions like: what is the trend of government spending and poverty in Nigeria? Does government spending reduce poverty in Nigeria? These questions and more are answered in this study.

• Aims and Objectives of the Study

The main aim of the study is to investigate whether poverty alleviation programmes through government expenditure has yielded the desired results of a reduction in the poverty level.

However, the specific objectives to guide this study shall be:

1. to analyze the trend of government expenditure and poverty in Nigeria;
2. to examine the effect of capital government expenditures on the poverty rate in Nigeria;
3. to examine the effect of recurrent government expenditures on the poverty rate in Nigeria; and
4. to determine the direction of causality between both government expenditures and the rate of poverty in Nigeria.
   • Statement of Hypotheses

The following null hypotheses shall be tested in this study.

1. There is no significant relationship between government capital expenditure and poverty alleviation in Nigeria.
2. There is no significant relationship between government recurrent expenditure and poverty alleviation in Nigeria.
   • Scope and Limitation of the Study

This work shall primarily be an appraisal of government expenditure and how it impacts on poverty alleviation in Nigeria. The time scope shall cover the period 1980 to 2017. The thirty-seven-year life span of the study was meant to facilitate concrete and reasonable statistical inferences based on the hypotheses raised.

• Organization of the Study

This study shall contain five chapters. The first chapter contains the background to the study, the statement of the problem, the objectives of the study, etc, that would guide the research work. Chapter two presents the literature review on the subject matter. The methodology adopted in the study shall be discussed in chapter three. Chapter four shall focus on the analysis of the results, and discussions of the data collected. The last chapter, chapter five shall present the summary of the findings, conclusion and appropriate recommendations.