Public sector spending in Nigeria: implications for poverty, demographic changes and millennium development goals target
Over the last two decades, budgetary allocations to both the Health and Education sectors have been on the increase in Nigeria, while a counter-factual feedback on its effects for various economic groups and distributional effect for different population households has not been defined and well known. The resultant effect has been gross inefficiency and sub-optimality in terms of observed outcomes of the fiscal framework. In-addition, there have been a continuous quest by the citizenry for increased allocations to these sectors because of its supposed impact on the poverty index and standard of living. Although this is a compelling reason, but what is worrisome and equally troubling, is that the increasing incidence of poverty and expanding inequality in the Nigerian society have not mitigated, despite the scaling up of funding on the social sectors. Furthermore, the current level of socioeconomic development in Nigeria is not in tandem with the distributive outcome targets set by the 2004 reforms. Thus, understanding the current structure of poverty in Nigeria as well as beneficiaries of public sector spending provides a sound basis for tackling inequality and redesigning the current pro-poor frameworks. However, our analysis is focused on the distributional spread of beneficiaries from services and the counterfactual reciprocity of expenditure benefits rather than measuring the exact value to recipients of government-sponsored services. Our research methodology used the 2004 Nigerian Living Standard Survey; 2010 Harmonized Nigerian Living Standard Survey; Recent Cros-sectional data (2014) in South East Nigeria and secondary sources. Econometric methods (Error Correction Method); Marginal Odds estimation techniques, Concentration Curves and Ordered Logistic Regression were used for our analysis. Statistical and Econometric Software’s (E-Views; SPSS; DAD and STATA) were used for estimations. Econometric results showed misalignments between population dynamics and public sector expenditure on education, health and economic services. The government consumption expenditure was not sensitive to demographic changes. The derived adjustment coefficients of -1.38, -1.51 and 0.51 respectively, for education, health and economic services indicate huge gaps in terms of what optimal spending should have been, giving the population dynamics. Our benefit incidence analysis indicates that substantive gains have been made at the primary education and health care level, at the state level for SE Nigeria but there is a gross misapplication of funds at the secondary and tertiary levels of both education and health sectors. Results show that the state governments’ is subsidizing the rich at the levels of both secondary and tertiary for education and health care. In addition, country wide results indicate that apart from public primary education and health care for urban residents, no other level of social service was absolutely progressive in general terms, by gender or by location while the tertiary level of both services were regressive as shown by the 2010 survey results, in comparism to the 2004 survey results. Using the Ordered Logistic Regression, our result inclines to the lifecycle hypothesis which maintains that poverty oscillates depending on the age. At a younger age, it tends to be on the high side and decreases during the middle ages and increases with age. Our results discards the feminization of poverty general framework that women or female headed households are more prone to poverty due principally to low education and lack of opportunity to own assets such as land amongst others. This wasn’t the case for the South East Region of Nigeria. Estimates indicate that education status, health status and access to health facilities affected the category of welfare of head of households and invariable, the entire household. In general, our analysis shows misalignment of social expenditure for various population groups, both at the federal and state levels; making doubtful the realization of basic MDGs. Nigeria has to combine growth policies and assuring that demographics count, with the poor fully participating in economic development. Also, the need for a refocusing in resource allocation taking into cognizance gender dimensions cannot be overemphasized. A general re-allocation of spending going to females and the poorer households would lead to improvement in gender equality and health status of women and children. Expediting actions towards qualitative education will lead directly to an acceleration of many of the other MDGs, especially those focusing on the reduction of poverty and inequality. To attain MDG targets (post 2015) within a shorter period of time, there is the need to improve the quality of social infrastructure and services. Furthermore, research should be focused on improving knowledge and understanding of what policies, technologies and investments matter for sustained growth in the country. This will create the much needed multiplier effect on other aggregates. The degree to which the poor participate in the growth process and share in its proceeds matter; both in the pace and pattern of growth. It is therefore important to have categorization of the population into economic groups when formulating a developmental framework for poverty reduction programmes. The study recommends sequencing of interventions, strengthening of institutions and other several interrelated areas to attain effectiveness of public sector spending.