Economic growth is fundamental for sustainable development. It is not possible, for a developing country, to ameliorate the quality of life of its growing population without economic growth. The relationship between government expenditure and economic growth has continued to generate series of debate among scholars. Government performs two functions- protection (and security) and provisions of certain public goods (Abdullah, 2000) and (Al-Yousif, 2000). Protection function consists of the creation of rule of law and enforcement of property rights. This helps to minimize risks of criminality, protect life and property, and the nation from external aggression. Under the provisions of public goods are defense, roads, education, health, and power, to mention few. Some scholars argue that increase in government expenditure on socio-economic and physical infrastructures encourages economic growth. For example, government expenditure on health and education raises the productivity of labour and increase the growth of national output. Similarly, expenditure on infrastructure such as roads, communications, power, etc, reduces production costs, increases private sector investment and profitability of firms, thus fostering economic growth. Supporting this view, scholars such as (Al-Yousif, 2000); (Abdullah, 200); (Ranjan and Sharma, 2008); and (Cooray, 2009) concluded that expansion of government expenditure contributes positively to economic growth. Economic growth represents the expansion of a country’s potential GDP or output. For instance, if the social rate of return on investment exceeds the private return, then tax policies that encourage can raise the growth rate and levels of utility. Growth models that incorporate public services, the optimal tax policy lingers on the characteristic of services. Growth means an increase in economic activities. Todaro (1995) citing Kuznets defined a country’s economic growth as a long-term rise in capacity to supply increasingly diverse economic goods to its population, this growth capacity based on advancing technology and the institutional and ideological adjustment that it demands.
Statement of the Problem
In the last decade, Nigerian economy has metamorphosed from the level of million naira to billion naira and postulating to trillion naira on the expenditure side of the budget. This will not be surprising if the economy is experiencing surplus or equilibrium on the records of balance of payment. Better still, if there are infrastructures to improve commerce with the system or social amenities to raise the welfare of average citizen of the economy. All these are not there, yet we always have a very high estimated expenditure. This indicates that something is definitely wrong either with the way government expands budget or with the ways and manners it has always been computed.
Hence, in order to justify reasons for so much expansionary effects on the way and manner public expenditure either capital or recurrent expenditure have been geometrically computed in or order to finance the infrastructural facilities towards improving commerce with the system or social amenities so as to raise the welfare of average citizen of the economy, this study tends to provide solution to the following questions: a. Is there any relationship between government expenditure either capital or recurrent expenditure and economic growth in Nigeria? b. Is there any way to justify the surplus, deficit or equilibrium position on Nigeria balance of payment due to the effects created by public spending? c. Is it true that as the nation is expanding its public expenditure on provision of infrastructural facilities as well as administration financing, the economy has been growth-enhancing? d. Does public expenditure on provision of infrastructural facilities as well as administration financing determines the pattern and form of growth in...
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