EFFECTS OF FEDERAL GOVERNMENT EXPENDITURE ON EDUCATION AND HEALTH IN NIGERIA (1986 – 2013)

EFFECTS OF FEDERAL GOVERNMENT EXPENDITURE ON EDUCATION AND HEALTH IN NIGERIA (1986 – 2013)

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CHAPTER ONE

INTRODUCTION

1.1  BACKGROUND OF THE STUDY

While public expenditure determines economic success, economic problems are often caused by imprudent public expenditure.  The World Development Report of 1998 warns that careless public expenditure can lead to prolonged recession and place a heavy burden on the poor, [Adubi, etal, 1999]. In situations where public expenditure is not properly managed, they usually create distortions which retard, rather than promote economic growth and development. This is typically the case for Nigeria, where, despite the huge resources that accrued to the nation during the oil boom era and the tremendous increase in public expenditure during the period, there was little to account for it. For quite a long period now, as generally observed, we have witnessed a lot of wastage in public resources, with little or no transparency and accountability in public expenditure. “This points to the conclusion that the manner and style by which public expenditure is made and managed determine, to a large extent, its success or otherwise in achieving the  desired growth and development objectives,” (Adubi and Obioma, 1999)     

The efficiency of public sector resource use is synonymous with economic management which is concern with the design and implementation of appropriate policies to enhance the performance of an economy in a desired positive direction. The overall challenge for government lies in how public spending on education and health care are linked to higher level education and health care outputs respectively.

Social programmes such as health care and education are generally believed to have a bearing on human development, and, consequently, increased government spending in those programmes is expected to result in better social outcomes.

Social outcomes

In Government institutions and non-commercial organizations which provide services to the people, the need for “results” cannot be easily seen and defended. These institutions most times stand as monopolies and it is not often clear on what type of “results” to aspire towards and expected to get from them.

The recent development is that government and public institutions are now showing increasing concerns and interests in results. Therefore the need for satisfactory results by the public has necessitated the need for accountable management of resources at the disposal of government. In the context of public expenditure, indicators of public production are typically used to measure outcomes. For example life expectancy and infant mortality rate (in health care), literacy rate and school enrolment (in education). Inputs used to produce these outcomes are public expenditure on health and education sectors. The specification of the outputs and inputs is a crucial step in the performance measurement of public service providers like education and healthcare.

The main question that needs to be addressed is whether there is a positive, identifiable relationship between Federal government social expenditure and social outcome. If Federal government social spending has a positive effect on social indicators, countries with higher public spending should have better indicators.

Regression analysis was done to establish whether there is a statistically significant relationship between health and education expenditure and selected output indicators. This is in line with the work of Gupta, et al (1997); educational attainment and health output were taken as dependent variables, while the level of public education and health spending respectively represent the independent variables.

However, recent empirical studies have noted that the impact on outcome indicators of government spending on social programmes is weak, both in developed and developing countries.

   Education and health constitute the basic framework for development in any society. “Government expenditure on health and education raises the productivity of labour and increase the growth of national output”, (Okoro, 2013:1). According to Todaro et al (2009), ‘’health  is central to well-being, and education is essential for a satisfying and rewarding life; both are fundamental to the broader notion of expanded human capabilities that lie at the heart of the meaning of development’’. Education serves as the platform for providing the ability of a country to absorb knowledge, adopt modern technology, and to develop the capacity for substantial growth and development, while health guarantees increases in productivity. According to Imoughele and Ismaila (2013), ‘’health is one of the significant factors that determine the quality of human capital which is a necessary factor for economic growth’’.

 Thus both health and education can also be seen as vital components of growth and development as inputs to the aggregate production function. It is a recognized fact that both of them play dual role as inputs and outputs in economic development. There are moderate achievements despite the fact that developing countries continues to face health and education challenges on its people.

1.2  STATEMENT OF THE PROBLEM

Public expenditure decisions in Nigeria seem not to have created the much desired impact on human capital development. Also  higher budgetary allocations to social sectors seems not to have been translated into an improvement in social outcomes, which calls for specific measures to what may look like the underlying inefficiency in spending. Whereas government expenditures on social services or amenities continue to rise exponentially, the public continues to complain about their unreliability, inadequacy and unsatisfactory nature. Why?

The efficiency of public sector resource use is synonymous with economic management which is concerned with the design and implementation of appropriate policies to enhance the performance of an economy in a desired positive direction. The overall challenge for government lies in how public spending on education and health care are linked to higher level education and health care outputs respectively. To get a sense of the efficiency in resource utilization in education for example, it is useful to contrast school enrolment, literacy rate with the amount of resources that is mobilized by the country for the sector.

The authentic economic idea of efficiency represents the ratio between what is brought and invested into the system and the results coming from it. The system may be called efficient when it attains the maximum level of results for a minimum level of investment. Investments and results in this context must be evaluated, aggregated, measured and marked.

Education and health care expenditures represents a major use of nation’s resources and has been growing rapidly within and outside government cycle. According to Tanzi (2004), “the measurement of efficiency generally requires;

a.       An estimation of costs;

b.      An estimation of output; and

c.       The comparison between the two

The larger the output in relation to the input made or given, the more efficient the target activity becomes.” Most times efficiency is defined in a comparative sense: the relations between benefits and costs in a country A is compared with that of other countries. If in a country A the benefits exceed the costs by a larger margin than in the other countries, then public expenditure in country A is considered more efficient (Tanzi, 2004). “More public expenditure is supposed to bring more benefits to the population”. High demand on health and education resources have warranted policy makers and administrators to search for means of delivering efficient health care and educational services to the populace without necessarily reducing budgetary allocations.

Each nation's future wealth and competitive position in the globalized world depends increasingly on its ability to create and absorb knowledge. An essential feature of knowledge is that it requires human capital (educated persons) for both its production and its application.

Indeed, long-term economic growth of the economy rests with its capacity to increase productivity through rapid technological progress. Therefore, the national system of education is the quintessential tool for the creation and application of knowledge. However, as most of the countries are faced with increasing demands on their limited (public) resources, there is an increasing pressure to improve resource allocation and utilization. Accordingly, policy makers in a number of countries became increasingly concerned with measuring efficiency. With education expenditures comprising a relatively important amount of national income, the interest in examining whether such expenditures are cost-effective has increased recently.

The importance of examining public sector expenditure efficiency is particularly pronounced for emerging market economies where public resources are normally insufficient. When services are publicly provided, performance measurement becomes an inevitable management tool because when inefficiency continues, the constituents of that inefficient unit suffer. The government needs benchmarking tools to provide incentives to good performing sectors and to induce inefficient sectors to perform better. However, the focus of the study is not on how to cut (public) expenditures, but rather more on investigating potential reserves to increase the value for money of public spending, i.e. how to make the most efficient use of limited public (and private) resources.

The overall challenges for government, lies in how public spending on health and education is linked to higher level of educational and health care outcomes/outputs. To get a sense of the efficiency in resource utilization as far as coverage of education and health are concerned, it is useful to contrast their output/outcomes with the amount of resources that is mobilized by the country for these sectors. The authentic economic idea of efficiency represents amount invested into the system and the results coming from the system. Demands for satisfactory results by the public have therefore necessitated the need for accountable management.  Human capital proxy by education and health indicators is quite important in explaining productivity in an economy. According to Ayogu (2000), “past governments’ investment activities in Nigeria have been criticized for being wasteful and highly inefficient”. Efficient utilization of public resources has been a challenge facing many developing countries in recent times.

According to CBN (2010) as cited in Imoughele and Ismaila (2013), the total government expenditure to health as at 1986, 1990, 2000 and 2010 was N360.4M, N558.1M, N18181.8M, and N149269.8M respectively. The capital expenditure also show same continuous increase in trend in 1986, 1990, 2000 and 2010 recorded N18.2M, N157.0, N6569.2M and N46649.8M respectively. Similarly, the recurrent expenditure also reveals continuous increase in value from 1986, 1990, 2000 and 2010 are N279.2M, N401.1M, N11612.60M and N102620M respectively.  The increases in social expenditure over these periods have not been able to translate to reduction of infants, under five and maternal mortality rates in the country

(Bakare and Sanmi, 2011). ``The Nigerian rate of infant mortality (91, per 1000 live births) is among the highest in the world, and the immunization coverage has dropped below thirty percent while mortality rate for children under age five is 192 death per one thousand by year 2007, it was also reported that more than one hundred and thirty-four thousand (134000) women died from pregnancy complications,” ( Imoughele and Ismaila,2013:221). In the same manner, the life expectancy ratio on the average has witnessed declining trend over the study period and the world bank 1999 ranked Nigerian 74th out of 115 countries based on the performance of some selected health indicators while the general health system performance was also by the 187th among the 191 member states by the world health organization. This scenario has raised a lot of concern among the discerning public who are now asking questions to know what happened to all the increases in the social expenditure on health and education over this study period. Nigeria’s educational attainment measured by the available indices is still far from satisfactory. Nigeria’s Human Development Index (HDI) has remained below the average of 0.5.Nigeria’s ranking has been within the last 10-15 per cent of all countries (Ojo,1995).Human Development Index(HDI) developed by the United Nations is a composite of three elements –the standard of living, longevity and knowledge.

To what extent has the government managed the social expenditure allocation to education and health.  As it is now certain and obvious that previous researches and recommendations have failed to address the issue of the impact and effect of social expenditures in Nigeria over the years, the present study tends to examine critically the effect or impact of such a fiscal policy on human capital development in Nigeria. Thus, the study tends to find solutions to the persistent and ever-increasing deterioration on human development index in Nigeria.

1.3 OBJECTIVES OF THE STUDY

The main objective of the study is to assess and examine the effect of federal government expenditure on health care and education outcomes in Nigeria.  Specifically the study aims to;

1.                   Determine the effect of federal government health expenditure on life expectancy in Nigeria.

2.                   Determine the effect of federal government health care spending on infant mortality rate.

3.                   Determine the effect of federal government education expenditure on adult literacy rate in Nigeria.

4.                   Determine the effect of federal government education expenditure on primary school enrolment in Nigeria.

5.                   Determine the effect of federal government education expenditure on secondary school enrolment in Nigeria.

 1.4      NULL HYPOTHESIS

This study has been structured to answer the following questions:

1.       Does federal government spending on health cause increase in life expectancy in Nigeria?

2.      How does federal government spending on health affect infant mortality rate in Nigeria?

3.      What effect has federal government education expenditure on adult literacy rate in Nigeria?

4.       How does federal government expenditure on education affect primary school enrolment in Nigeria?

5.      How does federal government expenditure on education affect level of secondary school enrolment in Nigeria?

1.5  RESEARCH HYPOTHESES

Ho1:    There is no significant positive relationship between life expectancy and federal government health expenditure.

Ho2:    There is no significant positive relationship between infant mortality   rate and federal government health expenditure.

Ho3:      Federal government education expenditure does not significantly and positively  affect adult literacy in Nigeria.

H04:     Federal government education expenditure does not significantly and positively affect primary school enrolment

Ho5:    Federal government education expenditure does not significantly and positively affect secondary school enrolment

1.6    SCOPE OF THE STUDY.

The scope of the study is limited to the period from 1986 to 2013. This is period when structural adjustment reforms started and up to democratic rule in Nigeria. The study made use of Federal Government of Nigeria budgets as framework of determining public expenditure profiles. The public revenues and expenditure data are reported and published by government agencies like Central Bank of Nigeria, the Federal Ministry of Finance, the Budget Office, National Bureau of Statistic and National Planning Commission.

1.7     SIGNIFICANCE OF THE STUDY

The outcome of this research work will enable the policy makers determine how to plan and make adequate policies on public expenditure management and control.

First, the findings of this study will enable policy makers understand the indicators or variables in human development index like life expectancy rate, infant mortality rate and school enrolment rate and adult literacy rate.

Secondly, it will provide support and assistance to the policy makers in formulating better policy guidelines on public expenditure management.

Third, it will enable fiscal policy planners to control the level of fiscal deficit within the economy and allow proper utilization of funds.

Finally, scholars will equally use the findings of this research work as a reference for further research on public expenditure management





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