EFFECTS OF PUBLIC EXPENDITURE TOWARDS HUMAN CAPITAL DEVELOPMENT AND ECONOMIC GROWTH

CHAPTER ONE

GENERAL INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Economic Growth which is the quantitative increase in output of goods and services in an economy at a particular point in time (i.e. Increase in production level of every sector of the economy) is one of the most important attributes of the macro-economic goals which every economy aims to achieve but Economic Development is sustained growth in the economy accomplished by improvement in the standard of the living of the people in the economy, it therefore considers an increase in output level that will reflects on Human Capital in the economy which includes though not limited to:-

Higher life Expectancy i.e. Good things of life

Higher Educational level

Good Health facility

Less Mortality rate

Higher Per Capital Income 
Increase in employment of natural, human and financial resources in the economy

Higher level of functional infrastructures

Basic facilities or necessities of life e.g. Food, Clothing, shelter etc.

Public Injection or Expenditure is an action the Government to engage in financial activities on a sector or the entire country for the purpose of influencing economic activities or attainment of desirable or preconceived macro-economic goals.

As the Government being the Public Sector plans to engage in certain financial expenditure in its short or long-term budget, it aims at providing certain public goods for the citizens to increase their standard of living which is investing in Human Capital.

However the realization that an healthy and well educated people makes an economy more productive has now shifted the focus of the Government to invest in human capital. Thus Human Capital is now regarded as the primary determinant of a country’s standard of living. The quality of human resources determines a nation’s growth and development.

Natural resources are being exploited, processed and developed by human beings to eventually benefit mankind. Natural or Physical resources of whatever kind will not on their own contribute to the development of a nation.

Thus the extent to which a nation develops is determined by the level of human resources which is a function of the level of Public Injection or Expenditure.       

This justifies the ever increasing government expenditure in education and health towards the development of human resources in the economy. There is a link between highly standard education, health and meaningful development. Education raises the quality of life, improves health and productivity in market and non market work, increases individuals access to paid employment.

According to Marble and Paltrino (1995), Expenditure in education and health raises per capita GNP, reduces poverty and increases life expectancy.

This is because individuals in the economy when healthy and highly educated will contribute effectively to the economic production and will reflect positively on the economy.

Injection of funds into development of Human Capital and enabling environment though is expenditure at present to the Government but could later become revenue to the Government in future.

Considering the case of United Kingdom where over the years have been investing in education and creating good social infrastructures is now recording 40% of its revenue from Net Income from Abroad accrued from foreign student and tourism. 

Clearly put a country which is unable to develop the skills and knowledge of its people and utilize them effectively for national development will be unable to develop in growth and output and such will be characterized with low utilization of both natural and human resources, under developed and poor infrastructures.

1.2      STATEMENT OF THE PROBLEM

Nigeria’s economic potential is well recognized. It is the biggest economy in the West African sub region. Given the country’s considerable resource endowment and coastal location there is potential for strong growth. Yet Nigeria has realized very little of this potentials. Previous efforts at planning and visioning were not sustained. The history of economic stagnation, declining welfare and social instability has undermined development for most of the past 30 years.

It is sad to note that Nigeria Standard of Education has fallen drastically in both product and infrastructures compared to other African Countries with less economic endowment e.g. Ghana, In spite of the increase in government expenditure on Human Resources Development over the years, its contributions to factors aiding economic growth and development is very minimal. Based on this, its becomes interesting to examine the nature of government expenditure on human resources in Nigeria and identify the link between Human Resources Development factors and economic growth in order to establish the effects of the increase in the government expenditure in education and health on the economic growth and development in Nigeria.

1.3     SIGNIFICANCE OF THE STUDY

According to Adam Smith, (1776) the basis for national wealth are skills, dexterity and competence of individuals. Human resources play strategic roles in the development of a nation to the extent that its development can not be overemphasized.

A formal education and health are twin major institutional mechanism required for building and augmenting people’s knowledge and attitude: therefore, it is imperative to study the effects of government huge expenditure over the years on education and health and their relative effects on economic growth of Nigeria.

Many of the previous studies on the basis on human resources development growth in Nigeria have concentrated only on the aspect of government expenditures on education, thereby failing to consider the aspect of government expenditure on health.

This is rather inadequate as evident in Odusola (1997) and Odubunmi (2007). Both the government expenditure on education and health need to be considered together to be able to access their joint impacts on economic growth.

The main focus of this study is geared towards harmonizing the two fundamental factors of Human Resources Development (Education and Health) as a product of Economic Growth and Development which is a function of Public Injection / Expenditures in Nigeria for over three and half decades between  1970 and 2009 due to their potentials in developing human Capital.

The finding of the study will add to the existing findings/results of other researchers conducted in the past in the scope of human resources development and economic growth.

1.4     OBJECTIVES OF THE STUDY

The broad Objectives of this study are to examine and specify Economic and Development in Nigeria as a function of Public of injection which will gear the development of skills and talents of individuals towards the achievement of the pre-conceived millennium goals -Vision 2020.

The objectives are organized as follows:-

1.       To analyze the pattern of government expenditure in education and health within the period of 1970 and 2009 in Nigeria.

2.       To assess the impacts and effects of such spending of the government on the economic growth and development in the country.

3.       To develop economic models that will clearly specify economic growth and development as a function of public injection which a change in the former will results to a change in the later.

4.       To make necessary conclusion and recommendation to the policy and budget planners of the Country.

1.5     SCOPE OF THE STUDY

The scope of this study shall cover the government expenditures for of 38 years from 1970 to 2009, it is believe that the periods are long enough the access and establish the pattern of government expenditure on education and health towards the development of human resources in the country.

The assumption is rested on the fact that, it marked the end of civil war in the country, thereby necessitating the reconstructing of the economy and mostly several development plans have been executed within the periods which are as follows:-

The Second National Development Plan            –        1970 – 1974

The Third National Development Plan              –        1975 – 1980

The Fourth National Development Plan            –        1981 – 1985

Structural Adjustment Program (SAP)              –        September 1986

1ST National Ruling Plan                                    –        1990 – 1992

National Economic Empowerment and

Development Strategy (NEEDS)                         –        1999 and 2003

Vision 2020/Seven-Point Agenda                        –        2007 till date

All this development plans are very important economic policies in the history of Nigeria as it all aims at economic growth through deregulation, privatization of all sectors and creation of wealth. However, the study focuses on the education and health sector of the Nigeria Economy.

1.6     RESEARCH QUESTION

1.       Is there any link between Public Expenditures and Economic Growth and Development?

2.       Is human resources Development a yardstick or Social Indicator in measuring Economic Growth and Development of a nation?

3.       What are the various impacts of Governmental Injection in the education and health sector on the Nigeria Economy?

4.       Are the past pattern of the Government Expenditures on education and health sufficient for growth in the sectors towards adequate development in the economy?

1.7     HYPOTHESIS OF THE STUDY

The Hypothesis’s of this study which are derived from the above question are stated as follows:-

Hypothesis 1,

Ho:    There is no statistical significant impact between Public Injection/Expenditure and Economic Growth and development towards Human Capital development considering Education.

Hi:     There is statistical significant impact between Public Injection/Expenditure and Economic Growth and development towards Human Capital development considering Education.

Hypothesis 2,

Ho:    There is no statistical significant impact between Public Injection/Expenditure and Economic Growth and development towards Human Capital development considering Health.

Hi:     There is statistical significant impact between Public Injection/Expenditure and Economic Growth and development towards Human Capital development considering Health.

1.8     SOURCES OF DATA AND METHODOLOGY OF THE STUDY To investigate the effects of Government Expenditure on human resources development in Nigeria in the period between 1970 and 2007, Secondary data were used to obtain values for the variables in the models.

Data for Government Expenditure on education and health, labour force and gross domestic formation were gathered from the Central Bank Statistical Bulletin (various issues), Federal Office of Statistics and National Bureau of statistics.

The Analysis will be descriptive statistical technique involving cross tabulation tables and percentage and also regressing the Data using the SPSS Software.

1.9     ORGANISATION OF THE STUDY

The study shall contain five chapters.

CHAPTER ONE:  The First Chapter shall contain the background of the study, statement of the research problem, significant of the study, objectives of the study and the research questions etc. that would guide the study.

CHAPTER TWO:  The Second Chapter would summaries the opinions of authorities on the subject matter.

CHAPTER THREE:    The Third Chapter shall state the methodology to be adopted in the study.

CHAPTER FOUR: The Fourth Chapter shall focus on the presentation and interpretation of the regression results.

CHAPTER FIVE:   The Fifth Chapter is the last Chapter which will present the summary of the findings, conclusion and appropriate recommendations.

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