Government Expenditure and Poverty Reduction in Nigeria (2000-2022)

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 Government Expenditure and Poverty Reduction in Nigeria (2000-2022)

Ogochukwu Edith NKAMNEBE
Nnamdi Azikiwe University, Nigeria
Received: 24 June 2023; Accepted: 17 July 2023; Published: 17 August 2023


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Abstract: This study investigates the association between government expenditure and poverty reduction in Nigeria from 2000 to 2022, employing a panel dataset and the Ordinary Least Squares (OLS) regression method. The Multidimensional Poverty Index (MPI) is the dependent variable, while government spending on education, health, and infrastructure is the independent variable. The analysis is conducted using E-VIEW statistical software. The study’s primary findings reveal that an increase in government education expenditure has a statistically significant and negative effect on poverty reduction, both in the short and long run. Conversely, government health expenditure demonstrates a significant negative impact only in the short run, losing its effectiveness in the long run. On the other hand, government capital expenditure exhibits a significant negative influence on poverty reduction in both the short run and long run. These results emphasise the critical importance of prioritising investments in education and infrastructure for sustained poverty reduction endeavours in Nigeria. In terms of policy implications, the study underscores the necessity of augmenting government spending on education to foster inclusive education and address the predicament of out-of-school children. Additionally, policymakers should consider healthcare systems’ long-term viability and efficacy while allocating health expenditures. Sustained investment in capital projects and infrastructure development is indispensable for poverty reduction. The study’s findings significantly contribute to existing knowledge and underscore the pivotal role of these sectors in poverty reduction strategies. Consequently, it underscores the urgency of targeted and enduring investments, efficient resource allocation, and comprehensive strategies to combat poverty and foster inclusive development within the country effectively.

Keywords: Government expenditure, poverty reduction, Nigeria, development, SDG

I. Introduction

Poverty in Nigeria has persisted despite efforts to achieve sustainable development, with poverty increasing over time (Monyei et al., 2023; Gidigbi, 2023). The rising poverty rate in Nigeria is a cause for concern, with a significant proportion of the population classified as “multidimensionally poor” (NBS, 2022). In this context, government expenditure has been recognised as critical in addressing poverty, allocating resources to social welfare programs, infrastructure development, and human capital formation (Dimnwobi et al., 2023).

The relationship between government expenditure and poverty reduction has been the subject of academic and policy debate, drawing on theoretical frameworks such as Keynesian and public choice theories. The Keynesian perspective suggests that increased government spending stimulates aggregate demand, leading to economic growth and employment generation, which can reduce poverty (Prasetyo & Cahynai, 2022). On the other hand, proponents of public choice theory emphasise the efficient allocation of resources and careful consideration of incentives to drive effective poverty reduction efforts (Chelwa et al., 2023). Empirical studies on government expenditure and poverty reduction have produced mixed findings, highlighting the need for context-specific analysis. Some studies have shown that government spending on social sectors, such as education, healthcare, and social protection, can positively impact poverty reduction (Odior, 2014). For instance, investments in education and skills development programs can empower individuals and contribute to economic growth.

However, despite significant allocations towards poverty alleviation programs and social services in Nigeria, poverty still needs to be solved (Nkamnebe, 2021; Nzeh et al., 2021). This raises the need to carefully examine government expenditure composition and efficient resource allocation to address the development paradox. Therefore, this study examines the relationship between government expenditure and poverty reduction in Nigeria from 2000 to 2022, focusing on education, health, and infrastructure spending. By analysing trends and patterns of government expenditure in these critical areas and their impact on poverty levels, this research contributes to understanding the effectiveness of government interventions in alleviating poverty in Nigeria.