The public sector and revitalization of the Nigeria economy

Abstract

This study attempts to empirically examine the role of public sector in revitalizing the Nigeria economy over the last three decades (1981-2011). This is justified on the basis that over the years there has been a persistent rise in government expenditure in Nigeria and, the huge government expenditure has not translated into any reasonable growth and development as the country is still ranked as one of the poorest in the world. The study used econometrics model with Ordinary Least Square (OLS) technique to capture the relationship between government expenditure and the standard of living of Nigerians by using per capita income (PCI) to proxy standard of living, and both total capital expenditure (TCAP) and total recurrent expenditure (TRE) to proxy government expenditure. Other variables are inflation rate and exchange rate. The result of the study shows that total recurrent expenditure and exchange rate are the only variables that significantly influence standard of living in Nigeria. While total recurrent expenditure exerts positive influence on standard of living, the influence of exchange rate is negative. The study reveals that public spending in Nigeria to a larger extent has not been productive and sustainable. The fiscal policy has not satisfactorily fulfilled its target and goals over the period of the study. One of the major recommendations is that allocation of government spending needs to be based on the level of need and the versatility of individual sectors.

Key words: Government Expenditure, Standard of Living, Recurrent Expenditure, Exchange rate.