An Examination of the Impact of Public Spending on Poverty Reduction in Nigeria

International Journal of Research and Innovation in Social Science (IJRISS) | Volume V, Issue XI, November 2021 | ISSN 2454–6186

An Examination of the Impact of Public Spending on Poverty Reduction in Nigeria

¹Dr. Abdulhadi Ibrahim & ²Salisu Umar
¹Department of Economics, Umar Suleiman College of Education, Gashua Yobe State Nigeria
²Department of Economics, Aminu Saleh College of Education, Azare Bauchi State Nigeria

Abstract: The study investigates the impact of public spending on poverty reduction in Nigeria using time series data from 1980-2019.Vector Autoregressive (VAR) model has been used to achieve the objectives of this study. The cointegration test reveals there is long run relationship among the variables used in the study. The normalized cointegration result further reveals that government total expenditure has significant impact on poverty. GDP and private investment have positive effects on poverty while inflation has negative impact on poverty. The study recommendations include the following among others: embezzlement of public funds and corruption should be tackled, GDP should be fairly distributed for it to have impact on poverty and measures should be put in place to curb inflationary pressure. Lastly unnecessary expenditures should be shortened and focus should be on expenditure that increases economic growth and reduces poverty.

Keywords: Public Spending, Poverty Reduction ,Cointegration, VAR

I. INTRODUCTION

Poverty has been a fundamental problem theoretically and empirically. Poverty in Nigeria is both rampant and long standing. Since 1996, the poverty incidence has never been below 40% (National Bureau of Statistics, 2017). The impact government expenditure has on poverty reduction has been acknowledged from time immemorial. Government provided relief materials to the poor during the Roman Empire and Greek civilizations or what is called Antiquity. For many centuries till the beginning of the 16th Century the responsibility of poverty alleviation rested on the church and mosque mainly through charity. However, the church and the state during the times were inseparable. The modern forms of government expenditure and intervention in poverty alleviation date back to the poor relief organized by the state after the 16thcentury. These gave way to early welfare schemes that were already in place by early 19th century and the social security schemes that guide poverty reduction today (Herman, 2004).
The reduction of poverty is the most difficult challenge facing any country in the developing world where on average majority of the population is considered poor. The description of Nigeria as a paradox by the World Bank (2012) has continued to be confirmed by events and official statistics in the country. The paradox is that the poverty level in Nigeria contradicts the country’s immense wealth. Evidences in Nigeria show that the number of those in poverty has continued to increase. For example, the number of those in

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