QUANTITATIVE ASSESSMENT OF THE EFFECT OF GOVERNMENT EXPENDITURE ON POVERTY INCIDENCE IN NIGERIA

Abstract

The allocation and level of government spending is meant to be one major factor that can reduce poverty in a country. This study uniquely conducts the assessment of the effect of government expenditure on poverty incidence in Nigeria over the period of 1986 — 2020. Stationary features of the series were tested by the Augmented Dickey — Fuller (ADF) unit root test. The ADF result indicates that the series are stationary at I(1). The result of the Johansen cointegration test indicates that there exists an equilibrium relationship among the variables in the study. The Johansen normalization cointegration result presented gave a proof by indicating that in the long-run government expenditure on building and construction, and government expenditure on health (GH) has positive impacts on poverty incidence while, government expenditure on security has a negative impact on poverty incidence in Nigeria. The vector error correction model (VECM) result of about 2.77% also indicates that there is an existing positive relationship between government spending on education and poverty incidence in Nigeria. GH has an inappropriate sign; thus, is an indication that GH do not have the desired impact relating to poverty reduction in Nigeria. Hence, the study recommends that the Nigerian government should raise her spending on health by promoting excellent health care and health facilities that will enhance health and economic provisioning of the poor. Also, the government should stretch more of its spending on education such as the finance of teachers’ training, research and development in order to reduce poverty level in Nigeria. The study further suggests a cross-country analysis on public spending, and poverty reduction in order to generalize these findings in a wider perspective.