INFRASTRUCTURAL SPENDING AND ECONOMIC GROWTH IN NIGERIA (1980-2015).
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INFRASTRUCTURAL SPENDING AND ECONOMIC GROWTH IN NIGERIA (1980-2015).
Chapter one
INTRODUCTION
1.1 Background of the Study
Infrastructural spending is an important weapon used by the government to regulate the economy. It is critical to the proper running of any economy, whether advanced or emerging.
Infrastructural spending originated from revenue allocation, which refers to the redistribution of the government’s budgetary resources among different tiers of government. In general, infrastructure spending has an impact on aggregate resources, as do fiscal and monetary policies.
In the Nigerian economy, public spending or expenditure is broadly divided into capital and recurrent expenditure. Recurrent expenditure refers to government administrative expenses such as wages, salaries, loan interest, maintenance, and so on
whereas capital expenditure or infrastructural spending refers to expenses on capital projects such as roads, railways, airports, seaports, education, health, and so on (Obinna, 2003).
In Nigeria, public expenditure is also divided into two categories: exhaustive and transfer expenditure. Exhaustive expenditure occurs when the government consumes and purchases factor inputs, whereas transfer expenditure does not. (Maku, 2014).
One of the primary goals of the government’s infrastructure investment is to provide infrastructure facilities, which require a significant amount of money to build and maintain. Infrastructure investment is likely to boost economic growth.
However, transitory economies invest extensively in physical infrastructure to improve citizens’ economic well-being and increase production of products and services across all economic sectors, hence boosting national output.
If government money is used to fund investments in roads, education, health, and agriculture, these investments will have a direct social and economic impact on the country by creating new opportunities and attracting foreign and domestic investment (Joasphat & Oliver, 2012).
Scholars have long been interested in the quantity of government expenditure and its impact on economic growth. Scholars say that more government spending on socioeconomic and physical infrastructure promotes economic growth.
For example, government spending on health and education improves a country’s human capital development. Similarly, investment in infrastructure such as roads, communication, and power reduces production costs, increases private sector participation, and increases firm profitability, all of which contribute favourably to growth (Abdullah, 2000; Corray, 2009; Maku, 2014).
The supply of infrastructural services to meet the demands of businesses, households, and other economic actors is a significant difficulty in the economic growth process of emerging countries such as Nigeria.
According to the World Bank Development Report (2015), developing economies invest over $200 billion per year, accounting for approximately 4% of their GDP and 20% of total investment. A significant increase in infrastructure facilities has been accomplished.
In recent years, Nigeria’s infrastructure spending has expanded as a result of huge earnings from petroleum sales, as well as growing demand for public utilities. According to available statistics, total capital spending has continued to rise over the last three decades.
Government investment on infrastructure and other capital projects has increased from N10.1 million in 1980 to N24.0 million in 1990, N239.4 million in 2007, N759.3 million in 2010, N1.1 billion in 2011, and N1.5 billion in 2015 (CBN, 2015).
However, increased spending on infrastructure and capital projects has not resulted in substantial growth and development for the country, since Nigeria remains one of the poorest countries in the world.
Furthermore, many Nigerians live in abysmal poverty, many graduates are unemployed, and 85% of the population survives on less than $1 per day. Furthermore, macroeconomic indices such as balance of payments, inflation rate, GDP per capita, and exchange rate have not been particularly impressive thus far.
It is worth noting that in Nigeria, infrastructure spending has not increased in proportion to economic development. Between 1980 and 1990, the growth rate of GDP declined from 57.15% to 2.87%, while the growth rate of infrastructure spending increased from 23.2% to 41.2%, demonstrating an inverse relationship between the two periods.
Furthermore, between 2000 and 2015, the growth rate in infrastructure spending increased from 40.8% to 46.4%, while the GDP growth rate decreased significantly from 8.79% to 6.75%. Thus, infrastructural spending has outpaced GDP growth throughout the same period (CBN, 2015).
1.2 Statement of Problem
The link between infrastructure spending and economic growth is critical for all developing nations, including Nigeria, which have seen increasing levels of infrastructural spending but low levels of economic progress over time.
Since independence, Nigeria’s income have increased year after year. Infrastructural spending by the government has also been on the rise in recent years; however, Nigeria remains plagued by low productivity in relation to demand, dilapidated state of existing infrastructural facilities, low level of technology, high rate of unemployment
a lack of functional and effective infrastructures, epileptic power supply, low per capita income, low savings and investment, and many other issues. It is therefore appropriate to investigate the impact of infrastructure spending on economic growth in Nigeria.
1.3 GOALS OF THE STUDY
The study’s main goal is to investigate the impact of infrastructure spending on economic growth in Nigeria between 1980 and 2015.
More specifically, the project aims to
To investigate the impact of health-related infrastructure spending on Nigeria’s economic growth.
To investigate the impact of education-related infrastructure spending on Nigerian economic growth.
The purpose of this study is to look at how agricultural infrastructure spending affects Nigerian economic growth.
To investigate the impact of oil-related infrastructure spending on Nigeria’s economic growth.
1.4 RESEARCH QUESTIONS.
The report raises the following research questions:
What effect does health-related infrastructure spending have on Nigeria’s economic growth?
What effect does infrastructure investment on education have on Nigeria’s economic growth?
How does agricultural infrastructure spending affect Nigeria’s economic growth?
How does oil-related infrastructure spending affect Nigeria’s economic growth?
1.5 Research Hypothesis
Four (4) hypotheses were developed to lead the study.
1. Hypothesis 1: Health infrastructure spending has no meaningful impact on Nigerian economic growth.
2. Hypothesis 2: Educational infrastructure spending has no major impact on Nigerian economic growth.
3. Hypothesis 3: Agriculture infrastructure spending has no major impact on Nigeria’s economic growth.
4. H04: Oil-related infrastructure spending has no substantial impact on Nigeria’s economic growth.
1.6 Justification for the Study.
Nigeria invests a lot of money on infrastructure, yet despite this, the economy hasn’t seen any genuine inclusive growth. Furthermore, the current infrastructure has not been in good condition.
Furthermore, crucial facilities such as education and health, which are essential for human capital development, have deteriorated in recent years. The investigation was consequently undertaken on that basis.
Furthermore, most previous studies have looked at the aggregate impact of recurrent and capital spending on Nigerian economic growth, but this study takes a different approach, examining the effect of infrastructural spending on health, education, agriculture, and oil on Nigerian economic growth up to 2015.
1.7 Scope of the Study
The study is designed to look at the impact of infrastructure spending on economic growth in Nigeria from 1980 to 2015.
1.8 Plan of the Study
The study consists of five chapters. The first chapter serves as the study’s introduction. The second chapter reviews material that was considered to be relevant to the inquiry.
The third chapter describes the study methodology, the fourth chapter goes into data presentation, analysis, and interpretation, and the last chapter focuses on the summary of research findings, conclusion, and policy suggestions.
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