PUBLIC EXPENDITURE AND EMPLOYMENT LEVEL IN NIGERIA EMPIRICAL EVOLUTION

Abstract
Government social expenditures are meant not only to increase human capital but also to reduce employment rate in Nigeria. Statistical evidence has shown that government social expenditures in Nigeria have been increasing yet there are doubts if these have contributed to reduction of unemployment in Nigeria. As a result, this study examined the effect of government social expenditure on employment level in Nigeria from 1981 to 2016. The study made use of secondary data and employed Ordinary Least Square (OLS) regression method. The results revealed that economically, REXPH, REXPE and CEXPEH did not conform to a-priori expectation. Statistically at individual level, government recurrent expenditure does not have statistical significant impact on unemployment in Nigeria, where as capital expenditure does. Also the overall statistic show that recurrent and capital expenditure on health and education has statistical significant impact on unemployment in Nigeria. From the results, the study therefore conclude that public expenditure on health and education and other social and community activities on both recurrent and capital nature meant to contribute to unemployment reduction Nigeria failed to do so. Hence recommends that Nigerian government should ensure that funds allocated to health, education and other social and community activities are properly utilized.

CHAPTER ONE
Introduction
1.1 Background of Study
Unemployment refers to the condition in which persons who are willing and able to work within an economy are jobless (Anyanwuocha, 2005). It is also referred to as condition of not having a job, often referred to as being "out of work". It occurs under certain conditions such as; firstly, down wing in an economy or business which resulted to staff outlay (cyclical unemployment). Secondly, mismatch between the skills that workers in the economy can offer, and the skills demanded of workers by employers (structural unemployment). Thirdly, time spent transitioning from one job to another (frictional unemployment) (Anyanwuocha, 2005). Unemployment is adverse to economic growth not because of its negative impact on national and per capita income but also its inherent problem in which citizens are not able to obtain good health care, quality education, good housing, healthy food, good water, and basic needs of life due to poor standard of living, poverty, and low income (Egbulonu & Wobilor, 2016).

Public expenditure on the other hand, is a policy under which the government uses its expenditure programmes to produce desirable effects such as provision of good roads, infrastructural facilities, and poverty reduction, provision of schools and health centers’ and job creation and avoid undesirable effects such as poverty, poor health care, poor education, poor housing, unhealthy food and low income and unemployment. By implication, public expenditure programmes are strong factors used to tackle unemployment and its inherent problems.

Over the years, unemployment has increased substantially around the globe, reflecting weakness in global economic activities. Unemployment negatively impacts on government's ability to generate income and also tends to reduce economic activity. The high unemployment rates currently experienced by many economies and Nigeria is not exempted reflect both cyclical conditions and deep-rooted weaknesses in labour market institutions and public expenditure programmes (Cottarelli 2012).

Before and in the early years of Nigerian independence, unemployment problems was not too obvious probably because of population rate and income from agricultural export, as agricultural export revenue was large enough to take care of the economy and its teaming population. Despite the success recorded in agriculture at national level, good number of persons were involved in subsistence agricultural practice both in the rural and urban. Secondly, crude oil export revenue was also a good complement to agricultural export revenue; these factors reduced pressures on white collar job and rural urban migration (umar, 2015). Since unemployment problems was not a national threat in the early years of Nigerian independence, the first national development plan of 1962-1968, second national development plan of 1970-1974, and third national development plan of 1977-1980 did not prioritized unemployment/employment issues. The decadence of agricultural sector as a result of over reliance on crude oil export revenue, and drastic fall in international price of crude oil in late 1970’s into 1980’s contributed to unemployment in Nigeria, with other inherent effects of unemployment such as; low per capita income, lack of access to good health care, lack of quality education, and poor standard of living. These factors constituted to prioritizing living standard and unemployment/employment issues in Nigeria’s fourth national development plan of 1981-1985 and national rolling plans of 19901992, 1993-1995, 1994-1996 (Onwuemele, 2013).

Unemployment is a situation in which an individual in an economy is looking for job and cannot find one. According to International Labour Organization (ILO) (2012), some scholars have argued that increase in government spending can be an effective tool to reduce unemployment rate. Also following the Keynesian view, government could reverse economic downturns by borrowing money from the private sector and then returning it through various spending programs. High levels of government consumption are likely to increase employment, profitability and investment via multiplier effects on aggregate demand. Thus, government expenditure, even of a recurrent nature, can contribute positively to the reduction of unemployment. John Maynard Keynes, probably the most influential economist of the 20th century, developed a theory that provided both an explanation for the prolonged unemployment of the 1930s and a recipe on how to generate recovery. His analysis indicated that fiscal policy could be used to maintain a high level of output and employment. According to the Keynesian theory, all fiscal measures that accelerate the pace of economic growth promote employment also. In line with this theory, most economists, especially macroeconomists, would agree that expansionary fiscal policy stimulates employment and lowers unemployment. The above theory is not true in Nigeria.

The Nigerian economy presents some peculiar dynamics that are worrisome. First, since independence, Nigeria’s fiscal policy objectives have included, among other things, availability of funds for financing economic development, the maximum flow of material resources consistent with minimum consumption requirements, minimizing inequalities in wealth, income and consumption standards, generation of employment and encouraging domestic production. Yet, it is unclear the exact relationship between rising government expenditure and social economic indicators like unemployment. Second, available data shows that unemployment has maintained a rising trend over the years from 4.1% in 1981 to 5.3% in 1983; 7.0% in 1987 to 13.1% in year 2000; 13.6% in 2001 to 14.9% in 2008; 19.7% in 2009 to 24.7% in 2013, but surprisingly, Nigeria’s GDP has been increasing, with an average growth rate of 6.4 percent between 2000 and 2014. This paradoxical situation has led to a flurry of studies and postulations aimed at providing explanation and solution to the phenomenon. The growth of government expenditure over the years has been geometrical to say the least while employment cannot be said to be growing commensurately. Fiscal policy has been very effective in general economic growth of the GDP, but, very ineffective in some other areas like employment generation. If output had been growing as desired, the incidences of run-away inflationary pressures or unemployment noticeable in certain years would not have occurred going by the postulations of theory. That growth is generally below the desires and expectations of the people only testifies that the employment of resources - human, monetary and material - is far below capacity. In the face of these startling realities, the big question begging for an answer is: why is unemployment increasing despite increase in government expenditure and public borrowing (debt)? We cannot say in good conscience that the huge amounts of money which the government claims to have pumped into the economy have produced the desired results. Thus, it becomes imperative to make proper analysis of the actual impact of government expenditure on the nominated macroeconomic objectives of the country. Although, empirical literature on this issue have produced inconclusive results (Holden and Sparrman, 2013), the issue is even more worrisome as previous indigenous studies have paid little or no attention to this issue. Most of the indigenous studies on government spending has focused on government spending-economic growth nexus (Uma et al, 2013; Onakoya and Somoye, 2013; Bakare; Taiwo and Agbatogun, 2012). Not many of the relevant studies, to the best of the author’s knowledge, covered the impact of government spending on employment/unemployment; none of these studies addressed the causality question as many devoted their attention to ordinary relational effects. More so, even the existing studies have largely been based on the experiences of developed countries. The experiences of developing countries like Nigeria are yet to be fully documented. Therefore, the examination of this issue has become imperative because, increasing unemployment rate can have significant negative social and economic consequences, like making reforms difficult, constraining economic growth, undermining social cohesion and stability, derailing various ongoing policy reforms (Lin et al., 2008) or even undermining the country’s long term desire of achieving improved national development. Thus, without utmost and urgent attention to this issue, it is doubtful how the Nigerian government hopes to attain the country’s goal of becoming one of the top 20 economies by year 2020.

Recognizing this obvious research gap, the authors set out to make a contribution to the body of existing literature by empirically examining the causal relationship between government expenditure variables (measured by capital and recurrent expenditure) and the employment of human resources in Nigeria (measured by unemployment rate). For ease of analyses and presentation the rest of the study is organized as follows: Following this introduction is section two which reviews related literature and theoretical framework. Section three is the research methodology adopted for this study. In section four is data analyses and interpretation of empirical results. Conclusion and policy recommendations are in section five.

From early 1980’s unemployment has become an issue of great concern in Nigeria, and different administrations in Nigeria have banked on expansionary fiscal policy precisely increase in public expenditure to tackle unemployment problems and its inherent effects. Public expenditure programmes so far banked on by Nigerian government in order to combat unemployment problems and its inherent effects cut across capital and recurrent expenditures (Olukayode, 2011). From 1981- 1995 average recurrent and capital public expenditures on social & community services stood at N3.65 billion and N2.20 billion respectively, these figure increased tremendously from 1996 – 2010, within this period average recurrent and capital public expenditures on social & community services stood at N168.33billion and N67.04 billion respectively. 2011- 2016 saw another rapid rise with recurrent and capital public expenditures on social & community services standing at N 797.24 billion and N103.14 billion respectively (Central Bank of Nigeria [CBN, 2016]). All these efforts were geared toward reduction of unemployment and improvement of standard of living in Nigeria.

1.2 Statement of Problem
From 1980’s till 2016 unemployment rate in Nigeria has been on the increase. According to statistical reports, unemployment rate in Nigeria stood at 27.9% in 1980, 30% in 1983, 40% in 1995, 51% in 2011, and 57.04% in 2016. The figure below shows the trend of unemployment rate in Nigeria from 1980 – 2016.

Nigerian government has spent huge amount of money through her public expenditure particularly on social & community services in order to halt unemployment problems in Nigeria. Total recurrent and capital expenditure from 2011 to 2016 stood at N4783.43 billion and N 618.85 billion respectively, out of which N797.24 billion and N103.14 billion were allocated to recurrent and capital public expenditures on social & community services respectively (CBN, 2016). Despite these expenditures, Nigerian economy is still facing unemployment crisis.

Continuous increase in public expenditures has made scholars to investigate the relationship between public expenditures and Nigerian economic growth. Their findings are as divergent as there are scholars. Regardless of the divergence in their findings, they all focused more on aggregate public expenditures and Nigerian economic growth without capturing the effect of public expenditures on social & community services and unemployment in Nigeria. From statistical records Nigerian government have spent huge on social & community services with the intention to reduce and/or eradicate unemployment, hence, there is need to examine the effect of social & community services public expenditures on both recurrent and capital nature on unemployment rate in Nigeria. The study attempts to fill these gaps as the major point of departure from the previous literatures reviewed.

1.3 Research Questions
This study attempts to answer the following questions:

1. What impact has government health recurrent expenditure on employment level in Nigeria?

2. What impact has government education recurrent expenditure on employment level in Nigeria?

3. What impact has government health and education capital expenditure on employment level in Nigeria?

1.4 Objectives of the Study
1. To analyse the impact of government health recurrent expenditure on employment level in Nigeria.

2. To examine the impact of government education recurrent expenditure on employment level in Nigeria.

3. To determine the impact of government health and education capital expenditure on employment level in Nigeria.

1.5 Hypotheses of the Study
The hypotheses of the study are stated all in null form

1. H01: government health recurrent expenditure has no significant impact on unemployment in Nigeria.

2. H02: government education recurrent expenditure has no significant impact on unemployment in Nigeria. H03: government health and education capital expenditure has no significant on unemployment in Nigeria.

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Item Type: Project Material  |  Attribute: 105 pages  |  Chapters: 1-5
Format: MS Word  |  Price: N3,000  |  Delivery: Within 30Mins.
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