CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
For any society to make progress there must be a government to run its affairs. However, citizens would perceive government as a burden when its recurrent expenditure is repeatedly higher that its capital expenditure, which should impact positively on the economy, especially in the areas of employment generation, investment and other activities that induce growth. This is the challenge that stares Nigeria in the face. It is now incontrovertible that the cost of running a democratic government is high in the country. This is aptly demonstrated in this year 2012 budget. While N2.472 trillion was proposed for recurrent expenditure, that is a figure prompted 72 per cent of the expenditure profile, N1.32 trillion, representing 28 per cent, was proposed for capital projects. Nigeria is currently in need of development like most other nations of the world. The dream of development for the improvement in the living standard of the people seems to be fading away. This could be ascribed to the inability of the various governments in the past to effectively utilise the available scarce resources to accomplish the desired goals of development in the society and one of the major reasons for this state of affair is the high cost of governance in the country.
The high cost of governance in Nigeria is seemly worrisome when we consider the fact that government expenditure in the past has not translated into any meaningful development in terms of the improvement in the lives of the people, this is because Nigeria still ranks among the poorest nations of the world. It has been observed that the prosperity of any nation hinges on efficient government. This is because it is the responsibility of the government to help in sustaining the social contract that binds every member of the state or country together. In a bid to overcome the challenges of high cost of governance, successive governments in Nigeria, since the return to democratic rule in 1999, have talked about the need to reduce the country’s high cost of governance as this will make more funds available for development. The irony of it is that rather than reducing it, every new government seems to increase it further than it inherited from its predecessor to the detriment of development and the people in one way or the other.
The United States, the most powerful and richest country in the world, has a comparatively slimmer and more cost-effective bureaucracy than Nigeria. It has less than 20 federal ministries and secretaries of state (equivalent to our own ministers). The British cabinet is smaller than that of Nigeria. And spending on the public service in Britain is undergoing savage cuts currently to reduce the cost of running the country. I can only think of two or three countries that, because of their huge size, have larger bureaucracies than Nigeria. But despite the huge size of its bureaucracy, top heavy with an inverted pyramid structure, Nigeria really does not have an effective public administration. This accounts for its poor budget implementation. Its bureaucracy remains weak, incompetent, and ineffective. A slimmer bureaucracy is likely to be more effective in implementing the government’s economic programmes and easier to control.
Total administrative expenditure as a percentage of gross domestic products (GDP) was a high as 8.72% in 1977 but fell to an all-time low of 2.04% in 2002. According to Adewole and Osabuohien (2007), if we assumed that government administrative expenditure supports the GDP of any given society, then an administrative expenditure of nearly 9 kobo went into the production of N1 worth of goods and services for the period of 1977 to 2002. A research work of Stephen Ejuvbekpokpo published in the Global Journal of Management and Business Research in 2012 titled “Cost of governance on economic development in Nigeria,” he found that “a unit rise in recurrent administrative expenditure would lead to a 0.52 unit fall in gross domestic product (GDP). Conversely, he found out that a unit rise in any capital administrative expenditure would obviously cause the gross domestic product to fall by 0.45 units.
Conclusively, in order to eradicate poverty is therefore necessary that high and sustained growth that generates productive jobs and brings benefits across society are made possible. This has historically included boosting productivity within existing sectors as well as rebalancing economies towards more productive sectors (e.g. from agriculture to manufacturing). Such structural change or economic transformation has lifted millions from poverty. Economic transformation can have a strong disturbing effect on political governance giving rise, that is, by interesting groups that push for accountable leaders and effective institutions. More effective institutions also become more affordable as countries get richer. Over time, economic transformation can therefore advance core governance objectives.
1.2 Statement of the Problem
Nigeria is a nation that is obviously in need of development like most other nations of the world. The dream of development for the improvement in the living standard of the people seems to be fading away. This could be ascribed to the inability of the various governments in the past to effectively utilize the available scarce resources to accomplish the desired goals of development in the society. When political institutions have considerable discretionary powers in the allocation or redistribution of resources relative to market institutions, unduly considerable efforts are expended on capturing political power. The dissipation of financial, physical and intellectual energies in capturing governance of the state leaves very little for creating appropriate conditions for cultivating a developmental state. Many of the high costs of governance are mainly due to the lack of institutional structures that divert attention away from rapacity to production. When the primary function of a state is essentially redistributive or predatory, then productive activities become less significant as a driving force of economic activities.
Economic activities of Nigeria has been unstable over the years and this has prompted Nigerians to express their opinions on the issue without positive indications that those charged with the responsibilities of ensuring an effective and efficient management of the cost of governance are prepared to have a change in the mode of operations. This prompted the researcher to work on the topic; cost of governance and economic growth in Nigeria.
1.3 Research Questions
The following are some of the questions which this study intends to answer:
i) what are the factors responsible for cost of governance and economic growth in Nigeria?
ii) what are the reasons for high cost of governance in Nigeria?
iii) what are the effects of high cost of governance on economic growth of Nigeria?
1.4 Objectives of the Study
The main aim of this research was to investigate the cost of governance on economic growth in Nigeria. The specific objectives were:
i) to evaluate the factors responsible for cost of governance and economic growth in Nigeria
ii) to determine the reasons for high cost of governance in Nigeria
iii) to assess out the effects of high cost of governance on economic growth of Nigeria
1.5 Significance of the Study
Previous studies on cost of governance in Nigeria focused primarily on supplementary appropriation or extra-budgetary expenditure as a way of understanding the strategies used by governments both at the federal, state and local levels to increase high cost of governance in their favour. This study will benefit the government by opening their eyes more on the rate of unemployment, level of corruption and the persistent problem of violence and crime in the country, including how these have affected the development and quality of life of the people. This will also benefit the masses by showing them the damaging effects that high of cost governance have on the economic growth of our dear nation.
1.6 Scope of the Study
The study investigated cost of governance on economic growth in Nigeria and therefore only limited to the government officials and some scholars in the areas of economics, social sciences, accounting, public administration and business administration. This was because those are the sets of people that the researcher perceived to really understand the topic.
1.7 Limitation of the study
The researcher was faced with some constraints to get the job done. Among them are time; the time was not enough for the researcher to get the job done on time this was because the researcher was still involving in the academic activities in the school. Access to the desired respondents was another factor that contributed to the delay of this study as some respondents were busy in their own work and gave the researcher only limited to respond to the questions. Finance was the major factor that the researcher encountered because, the questionnaires printed out by researcher were not enough and the researcher had to suspend the work till the funds were available.
1.8 Definitions of Terms
The following terms were used in the course of this study:
Cost of governance: This is the money spent on administrative processes. It is also known as administrative expenditure.
Economic growth: This is the increase in the inflation-adjusted market value of the goods and services produced by an economy over time
Gross Domestic Product: This is a monetary measure of the market value of all final goods and services produced in a period of year.
