THE EFFECTIVENESS OF A STATUTORY AUDITOR IN FRAUD MANAGEMENT IN GOVERNMENT ESTABLISHMENT

 

Abstract

This research work is designed to achieve the specific objective of examining the role played by Auditors in the protection of public funds in the government owned establishments, ministries or government parastatals. The research goes into providing a systematic financial accountability that will promote proper stewardship for asset, deter wastes, dishonesty and promote effectiveness. However, the literature review helped to ascertain other writers’ views concerning the subject under study which explains how government owned establishments are organized such that fraud could be detected easily and in time just because particular audits are assigned to particular personnel. The data used for this work was collected from primary source, using questionnaire. Against the background, invaluable and reliable discoveries were made. Finally the research recommends that the legislative of government should make it mandatory for the accountant general to submit financial statement of government account to audit department for audit work. Auditors should be given power to execute or enforce its finding after its work has been review by the public account committee.

 

CHAPTER ONE

INTRODUCTION

Background to the Study

There is a general awareness all over the world for the need to pay greater attention to the improvement of government establishment. The reason is obvious, government constitutes the largest single business entity and her pattern of expenditure through its various parastatals, agencies and commission stimulate lot of economic activities. As a result of these government huge involvement in economic activities, initiatives are being taken all over the world toward improvement of the standard of account and auditing department in government. The public sector accounting has the responsibility of developing systematic arrangement to assist management in the performance of the services of the constitution. While the public sector auditor has among other duties, the complementary role to examine whether management actually performed efficiently.

The public sector auditor has to satisfy himself that the account presented have been prepared in accordance with statutory and constitutional requirement and regulation and that the proper accounting practice have been observed in their complication with the growing sized and complexity of public sector in the recent years. The importance of the statutory auditor has correspondingly increase so that it is today a major factor in establishing the quality of public sector internal control and its development has made a considerable contribution to the improvement of the government establishment.

The purpose of this research is to investigate the effectiveness of a statutory auditor in fraud management in government establishment using Federal Pay Office Benin City as my case study.

 

THE EFFECTIVENESS OF A STATUTORY AUDITOR IN FRAUD MANAGEMENT IN GOVERNMENT ESTABLISHMENT

 

Statement of Problem

Most organization and individual employ the service of an external auditor in order to comply with the legal requirement of the act. They may be unaware of the usefulness of the auditor to the organization and as a result of the ignorance, the auditor is bound to encounter some inherent problem in performing his duties properly. To put an end to the problem, the auditor on his own extra care, from an independent opinions which can be wholly relied upon by the financial statement users.

Therefore as regard the corporation under the study, the examination of the following problems are considered worthwhile and thus deserve an adequate attention. 

  • Lack of understanding of the purpose of auditing among the society in general.
  • Lack of a well defined goal oriented policies aimed at building up a strong and sound financial system.

Inability for the government owned establishment to maintain a sound system of internal control

 

THE EFFECTIVENESS OF A STATUTORY AUDITOR IN FRAUD MANAGEMENT IN GOVERNMENT ESTABLISHMENT

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IMPACT OF ENTREPRENEURSHIP DEVELOPMENT IN A DEVELOPING ECONOMY

 

ABSTRACT

This study examines the impact of entrepreneurship development in a developing economy like Nigeria. It is the contention of this research that entrepreneurship plays important role for moderate standard of living and job creation to help the Nigeria industrial workers. The data for this study are collected through the questionnaires, interview and secondary method, however it is discussed extensively the background information to the study, and it presents status and projection into the future, the statement of problems, objective, scope, significance and the benefits of the study. In this research, an examination is made on the relevant and related literature review and the research methodology used for the study.

The hypotheses in this field were tested with the chi square statistics. A were look and critical study is made in the analysis presentation and interpretation of data collected through questionnaires, oral interview and discussion with management staff. Finally, the findings of the study such recommendations like the government should create an enabling environment for the operation and survival of small scale enterprise in Nigeria and the government should grant incentives to small scale business to boast their operation.

 

 

 

CHAPTER ONE

 INTRODUCTION

1.1     Background to the Study

Entrepreneurship practice in Nigeria predates the era of translate slave trade. This is based on the belief that no manor community is completely self sufficiency; one may have certain commodity or skills which other do not have. For instance, one community may have a river full of fish, the other a forest filled with animals thus they make an exchange, meat for fish.

With further development, there was need to fix certain days for trading and gradually, some persons who lack the skills of production made it appoint of duty to specialize in buying from the producer who may be too busy to convey their goods from one place to another and those in need of such items

In the past entrepreneurs in Africa were men and women of modest education and little management skills, however, through hard work and determination, the surmounted the hurdles placed on their was by the colonialist and competed successfully with Indians, Lebanese and other foreign forms. Today, Nigerians are better educated with more exposed to modern technology and many have acquired respectable managerial experience.

The role of entrepreneurship in economic development more than just increasing change in per capital output and income, it involves initiating and constituting change in the structure of business and society. This is accompanied by growth and increasing in output, which allows more wealth to be divided by the various participants. Therefore this project, the impact of entrepreneurship development in a developing economy using delta state as a case study (some selected business) is aimed at finding out the contribution of small scale enterprises to the economic growth and development of our country Nigeria.

According to Face and Scothmore (1990), the process of entrepreneurship is recognizes as being at the heart of any economic development task and driven by the motivation of individuals, who are seeking to satisfy their personal and economic development is to create opportunities for personal fulfilment through economic activities. This implies that, the policy-makers and entrepreneurs in order to achieve economic reward and property.

The present situation of our economic (Nigeria) when compare with what was obtains decade ago, gives an indication that Nigeria is fast developing economically among other things, creation of employment opportunities create condition which prove to be helpful in reducing the gap between rich and poor. More so, entrepreneurship development has contributed immensely to our economy by increasing local value, technological advancement, and gross domestic product and nearer resources to the people.

This is more reason why government should out into consideration the above topic in formation of new policy and new national low will allow the easy running of small scale enterprise. It is knowledgeable that Nigeria expanding commercially, agriculturally and industrially and many Nigerian students want to be actively involved in business rather than passive observers, it is therefore necessary that a study of the structure of small scale industries should begin with some introductory remark on the appeal of economic development as a necessary ingredient to economic policy in developing countries which ours is not an exception.

Chel (1991) concluded that there has been a gradual increase in awareness of the role of entrepreneurs in economic growth, various approaches being used to explain motivations.

Form the forgoing it is clear that the entrepreneurship development is an economic agent both born and made represent an enlightening perspective of a country, entrepreneurs are generally committed and determined with the qualities to survive, which represent a positive approach to development in part with high level of self confidence therefore they can survive, grow and expand our economy in Nigeria, if government can create an enabling environment for their operations. It should be noted that in many developing countries entrepreneurship development by and large has become synonymous with economic growth and the reasons are not farfetched.

Indigenous ownership and control in strategic industries are essential in order to maximize local relation of profit, increase the net contribution of the national economy. Entrepreneurship development has the potential of achieving independence autonomy through one’s own effort. The second desirable virtue of generating employment for oneself and other both educated and uneducated, is to allow free enterprise to flourish, competitive and perceive the local needs and provide the opportunities for the creation of new ideas for economic growth and development, in other words, it is seen as say of life that enable people to take advantage of their own efforts.

IMPACT OF ENTREPRENEURSHIP DEVELOPMENT IN A DEVELOPING ECONOMY

1.2     Statement of the Problem

Individual have on their own responded to the new employment pattern by taking personal control of their career through entrepreneurship.     Through entrepreneurship the individuals or society is fighting for employment opportunities. The problem here is to find out how the individual or society has developed through entrepreneurship. In view of this, students want to look at the impact of entrepreneurship development in a developing economy.

IMPACT OF ENTREPRENEURSHIP DEVELOPMENT IN A DEVELOPING ECONOMY

VALUATION OF INFORMATION AND

COMMUNICATION TECHNOLOGY (ICT) FACILITIES

FOR EFFECTIVE TEACHING AND LEARNING IN

SECONDARY SCHOOLS

 

Abstarct

 

The topic of this work is evaluation of Information and Communication Technology (ICT) facilities for effective teaching and learning in secondary schools in Ekwusigo Local Government Area of Anambra State. Research Question of this study includes: what are the ICT facilities available for teaching and learning in secondary schools in Ekwusigo Local Government Area?, how are the ICT facilities accessible for teaching and learning in secondary schools in Ekwusigo Local Government Area?, what are the limitations in the use of ICT facilities in teaching and learning in secondary schools in Ekwusigo Local Government Area?, and in what ways have ICT impacted on the academic performance of students in secondary schools in Ekwusigo Local Government Area, descriptive survey design was used.

The population size was 15675 out of which two hundred (200) respondents made up of teachers and students in Ekwusigo Local Government Area were the sample size that participated in the study. Data were collected through the use of structured questionnaire and were analyzed with mean and frequency. The result showed that computer set, projector, projector screen, printer, modem, modem are the ICT facilities available for teaching and learning in secondary schools in Ekwusigo Local Government Area. Implication of the study were drawn based on the findings, the study recommended among others that the State and Federal Ministry of Education should make provisions for ICT facilities for use in teaching and learning in secondary schools; that the State and Federal Ministry of Education should establish training programmes for training and re-training of teachers on the use of ICT facilities in teaching. Suggestions for further study were also made.

cHAPTER ONE

NTRODUCTION

Background to the Study

 

Information and Communication Technology (ICT) is often used as an extended synonym for Information Technology (IT), but is a more specific term that stresses the role of unified communications and the integration of telecommunications (telephone lines and wireless signals), computers as well as necessary enterprise software, middleware, storage, and audio-visual systems, which enable users to access, store, transmit, and manipulate information (Murray, 2011). According to William (2009), it is also used to refer to the convergence of audio-visual and telephone networks with computer networks through a single cabling or link system. There are large economic incentives (huge cost savings due to elimination of the telephone network) to merge the telephone network with the computer network system using a single unified system of cabling, signal distribution and managemeperipherals and connections to the Internnt.

Information and Communication Technologies (ICTs) are generally accepted as a modern instrumental tool that enables the educators to modify the teaching methods they use in order to increase the students’ performances.   Educational institutions around the world adopted ICT as a method of teaching as well as offering ICT related academic programs. In Bangladesh, different educational institutions have adopted ICT as a method of teaching (Murray, 2011). Onu (2009) posited that ICT technologies includes desktop and laptop computers, software, et that are intended to fulfill information processing and communication functions. The introduction of these facilities for effective teaching and learning facilitates the actualization of policy on education.

Aguokogbuo (2010) defined teaching as a deliberate effort by nature or experience person in impacting information, skills, etc to a less experience person. This teaching is made effective by deliberate use of instructional materials such as ICT facilities. Fadeiye (2011) defined effective teaching as potentially, the largest single school influence on students’ achievement. Effective teachers have high expectations that all their students will achieve to their potential and are committed to providing a high quality education for all their learners. They treat children and young people as individuals, positively acknowledging their differences and building collaborative learning relationships.

Effective teachers are approachable, communicate clearly with parents, and listen to the aspirations and concerns that parents have for their children. They are responsive and take appropriate action. Aguokogbuo (2010) also stated that there is a wide spectrum of materials available for use in teaching and learning. To achieve the objectives of education in secondary schools, it is expected that the subject be made real, stimulating and be related to everyday life experience, by the introduction of ICT facilities as an instructional materials. From the above definition, it is obvious that education is supposed to prepare individual for smooth transition from school to workplace. Based on the foregoing, the researcher saw the need to evaluate the ICT facilities for effective teaching and learning in secondary schools in Ekwusigo Local Government Area of Anambra State.

VALUATION OF INFORMATION AND

COMMUNICATION TECHNOLOGY (ICT) FACILITIES

FOR EFFECTIVE TEACHING AND LEARNING IN

SECONDARY SCHOOLS

 

Statement of the Problem

The basic goal of what teachers genuinely do in the classroom setting is to cause effective learning to occur. This is in line with the views of authorities, who see the classroom as the power house in which the success of the learning process is generated. Unfortunately, some instructional materials have not met the expected requirements which are to cause effective learning. Also, some teachers have failed to understand the importance of ICT facilities for effective teaching and learning in this digital age. This trend is worrisome especially in this era of digitalization and thus ask: What is the position of Information and Communication Technology (ICT) facilities in the effective teaching and learning in secondary schools in Ekwusigo Local Government Area of Anambra State?

VALUATION OF INFORMATION AND

COMMUNICATION TECHNOLOGY (ICT) FACILITIES

FOR EFFECTIVE TEACHING AND LEARNING IN

SECONDARY SCHOOLS

THE ASSESSMENT OF THE INFLUENCE OF CORPORATE IMAGE ON MARKETING A MANUFACTUERS BRAND NAME PRODUCT

ABSTRACT

The write is motivated into researching in the topic “ The Assessment of the influence of co-operate image on marketing a manufacturers brand name” products is carried out in Onitsha Anambra State with particular attentions to Denco Foam ltd in the process of conducting the research. The main aim of this research work is to find out the roles and benefits derived in engaging into co-operate image of a company. The researcher was of the view that good corporate  image will appear in the good book of consumer and also firms can establish corporate image through public relations. The project is structured  into five chapter one takes an introductory look at the influence of corporate image stating the problems, the purpose and the research questions, while chapter two conduct a review of relevant literature on the topic, chapter three explains the various methods used in this research work, chapter four deals with analysis of data, while chapter five deals with summary of the findings recommendations , conclusion, limitations of the study, suggestion for further research. In conclusion, the research is strongly of the view that if well planned corporate image activities were used, definitely it will influence the consumer’s behavior and also create mutual relationship between the company and consumer of the products.

 

CHAPTER ONE

INTRODUCTION

Companies or corporate bodies have legal existence. They are separated by legal entities and so, they are different from the owners. The owners have their own individual and is different from another individual and so do companies do to another even though they fall under the same industry, producing the same of similar products.   The image of a company is the way the company appears in the eyes of the public. How the public does look as – is the company  a good one or bad one, how about the product they offer, do they contribute to the development of the community?.  Business organizations have been trying to build a positive image in the mind of the audience because this book of the public and such a firm is likely to enjoy their patronage.

 

BRIEF HISTORY OF DENCO FOAM

Denco Foam limited Onitsha Anambra state is a company that manufactures foam, pillow, curtain and other indoor materials. The company is located at Nkpor Onitsha in Anambra State. It started its existence in 1985 as a one-man business. The owner Chief Godwin  Okafor in need of fund for expansion accepted to run the business as a private company after receiving money from friends and relations in 1983. The company got registered in 1990 and since then they had been enjoying limited competition from vita foam, the only competition at that time. The number of employees around 1985 were about 16(sixteen) but immediately after the expansion programme of 1990, the number increase to thirty-five (35). Presently the company has more than one hundred and seventy (170) employees across the state.

Denco foam has distributed out more than six town and states namely; Enugu, Aba, Obosi, Nnobi, Nnewi and Imo State. Apart from foam, the company also produce pillow curtains, bedspread and towel. They also have customers in Aba, Enugu and Imo state. They obtain their Raw material locally, especially from Northern State where cotton is produced at cheaper rate .At Present the company starts to face stiff competition from other manufacturing similar product. Among them are ; Mouka foam, Apaco foam, Marta foam, and vita foam.

THE ASSESSMENT OF THE INFLUENCE OF CORPORATE IMAGE ON MARKETING A MANUFACTUERS BRAND NAME PRODUCT

 

STATEMENT OF THE PROBLEM

This is as a result of their increase in number. It appears that company is not equally communicating with their public effectively, this may be responsible for their loss of market share.      Companies have not been able to create public relation department that would have helped them to create good image for them. Huge amount of money to run a separate public relation department had also prevented the firm from creating their own, the inability of the company to employ qualified public relation department . Finally, the company inability to satisfied their employees means that employees are not comfortable with working with them so they will not have good things to tell the public about the company.

THE ASSESSMENT OF THE INFLUENCE OF CORPORATE IMAGE ON MARKETING A MANUFACTUERS BRAND NAME PRODUCT

MACROECONOMIC EFFECT OF GOVERNMENT A BUDGET DEFICIT IN NIGERIA 1970-2011

 

ABSTRACT

This study investigates macroeconomic effects of government budget deficit on economic performance in Nigeria from 1970 – 2011 using a co-integration and error correction model. The result indicate that the variables GDP, EXCHR and INF which affects economic performance, showed a positive value, indicating a positive relationship between budget deficit and macro-economic performance. However, INTERE and INVEST indicate a negative signs,
implying an inverse relationship between budget deficit and interest rate and investment during the period under consideration. The co-integration test result obtained using Johansson test procedure confirms one long run equilibrium relationship between the variables thereby conforming to Granger representation theorem which states that a long run equilibrium relationship implies error correction mechanisms. The error correction model result  indicates that all the coefficients were correctly signed and statistically significant at 1 percent level The Granger causality test result indicates that there is a bi-directional causality between Budget deficits and GDP.

There exists a bi-directional causality between exchange rates and budget deficits. Granger relationship between interest rates and budget deficits showed that there exists a non bi-directional causality between the two variables. It was found that inflation does not Granger cause budget deficits and Budget deficits do not Granger cause inflation. The causality between budget deficit and investment indicate a bidirectional relationship. Again the second test (simple regression) on exchange rate single effect revealed that budget deficit has a positive relationship with exchange rate. The structural stability test
result indicates that there is evidence of structural instability during the period under consideration. Statistically, the t-statistics of the variables indicates that only three variables which include GDP, EXCHR and INF were statistically significant. The study therefore recommends that when fiscal deficits are used to correcting economic problems or adjusting economic variables, such deficits should be implemented with close monitoring of it’s specific effects on target economic variables.

Thus based on the result obtained, an effective fiscal policy that is conscious of inflation and investment should be put in place to checkmate the problem found with inflation and investment in this work. Furthermore, curbing corruption, an important source of fiscal deficits in Nigeria, will help to reduce the deficits and ensure prudent management of national resources.

CHAPTER ONE

INTRODUCTION
1.1 Background of the study

Rapid and sustained output growth of the domestic economy of Nigeria has since the political independence in 1960 been of paramount importance to successive governments in the country. Consequently, governments have since implemented several national development plans and programmes aimed at boosting productivity, as well as, diversifying the domestic economic base. The goal of this has been for the attainment of high levels of economic development that would translate into an improvement in the living standards of the populace, and hence a reduction in poverty through an increase in the domestic output and the creation of employment, and thereby, the maintenance of a favorable balance of payments position (Ariyo, 1997 and Ojo et al, 1998). The infrastructural and capital resources required for the attainment of the objectives identified  above have however been scarce. This has  necessitated the interventions of the governments in the economy through the provision of the required huge capital outlay necessary for large-scale
production in heavy industries and for the provision of other infrastructure. Government interventions were made possible by the oil boom of the early 1970s when Nigeria earned unprecedented amounts of foreign exchange from the export of crude oil (Sikkam, 1998).

Government expenditures thus grew rapidly with a similar growth in the bureaucracy. But the oil glut that followed meant that government revenues declined significantly (Akor, 2001). As governments were reluctant in reducing the bloated expenditures that had resulted during the oil boom, they were forced to seek alternative means of financing their expenditures. Governments thus resorted to budget deficits. Budget deficits, a situation where current expenditure exceeds current expected income, have become a recurring feature of public sector financing in Nigeria. The Keynesian demand-side economics emphasized the need for expansion in government expenditures even beyond current income, particularly during depressions when the economy suffers from an insufficiency of active demand, such as the Great Depression of 1929 to 1932, and more recently, the 2008 Global Financial and Economic Crisis.

This will thereby increase the demand for productive output, resulting in unemployment being overcome and general improvement in macroeconomic
performance (Anyanwu and Oaikhenan, 1995; Ogboru, 2006). The policy of budget deficits has however posed challenges to the Nigerian economy with regard to its effectiveness and the accumulation of debt, the justification for growth notwithstanding. The relationship between budget deficits and macroeconomic performance through variables (such as growth, money supply, private investment via interest rates, trade deficit, exchange rate, among others) represents one of the most widely debated topics among economists and policy makers in both developed and developing countries (Saleh, 2003). This relationship can either be negative, positive or a no positive or negative relationship. The differences on the nature of the relationship between budget deficits and these macroeconomic variables as found in economic literatures could be explained by the methodology, the country and the nature of the data used by the different researchers.

Fischer(1989) in a finding maintained that Large budget deficits pose real threats to macroeconomic stability and therefore to growth and development. Large deficits will, perhaps after some time, lead to inflation via money supply, exchange crises, external debt crises, and high real interest rates. In a developing open economy like Nigeria, with weak production capacity, government budget deficits increases inflation through money supply, create debt over hang, raise real interest rates, crowd out domestic investment, and cause the other currencies to appreciate vis-à-vis the domestic currency and further deteriorate the trade deficit. The consideration of macroeconomics of the government budget deficit points to the dangers that arise from excessive budget deficits as mentioned above with implications for the real exchange rate, trade account, and for investment. Fischer (1989) states that none of the links are automatic, for there are choices in the sources of financing, and lags in the effects of money printing and borrowing on inflation and interest rates. Busari and Omoke (2007) assert that the extent, to which the economy can be stabilized particularly in the short to medium term, will depend largely on the fiscal behavior of the government.

According to the authors, since 1986, when the reform measures started, Nigeria has witnessed various fiscal reforms all aimed at stabilizing the macro economy and ensuring sustained growth. However, two decades into the reform, there is considerable debate over the conduct of fiscal policy and its relation to economic stability. Behaviour of key macroeconomic aggregates suggests that the economy is far from being stable. In Nigeria, an attempt to grow the economy has created a situation where the nation has become frequently used to large budget deficits that have over the years resulted to sale of government bonds and borrowing (both internal and external) in order to meet up with the required expenditures. Anyanwu (1998), opined that since the inception of structural Adjustment Programme (SAP) in Nigeria in 1986, the fiscal operation of the federal government have been resulting in overall deficit. The resultant effects of this are persistent decline in real output caused by lower foreign exchange and reliance on borrowing to finance the deficits with it’s
attendant macroeconomic imbalance/ volatility.

Fiscal deficit in Nigeria has therefore become an issue of concern. An attempt to finance fiscal deficit has made Nigeria seriously indebted to some International financial Institutions like the Paris Club. The nature of the debt was alarming, until 2005 when the Club granted debt relief to
Nigeria. As at fourth Quarter of 2011, the nation’s external debts stood at about $ 5.3 billion, while domestic debts is about # 5.2 trillion, making a total debt of $ 39.7 billion (dollar), which is about 20 percent of Nigeria’s Gross Domestic Product (GDP). This occurred mainly as a result of high budget deficit.
Evidence from Sanisi and Okonjo-Iweala,(2011),has shown that Nigeria’s recurrent expenditure is more than 70% of the total budget. This suggest that there is need to cut down recurrent expenditures: ie, the over – head cost of running government ministries, Departments and Agencies (MDAs), to reduce the budget deficit to a manageable level of three percent of output, while boosting Infrastructure Investments to create jobs. The current situation where recurrent budget takes an entire 75 percent of total budget could not support the type of aggressive capital development that Nigerians yearn for,(Okonjo- Iweal 2011). Sanusi (2011) pointed out that it will be historically difficult to stabilize macroeconomic variables in Nigeria, if larger proportion
of the money borrowed to finance deficit is spend on consumption instead of Investments.

One Implication of this uncontrolled budget expenditure is that it affect macroeconomic performance negatively. Thus, the critical issue confronting the government is how to adequately control budget deficit in order to ensure stability of macroeconomic variables. Shonekon (1993), Olomola (2000,2006), Obadan (2003) and Anyanwu (1998), opined that lack of fiscal discipline possess threat to macroeconomic stability in Nigeria, because excessive
budget deficits are mostly linked with planned political decision, and not as a result of external shocks or reactions on prevailing internal economic situation.
For most of the past three decades or so, net budget balance of the Federal government has been generally on the negative side. Between 1970 and 1995, the ratio was on the increase peaking in  1995 at above 12 percent. The ratio then declined till 1996 before starting another round of downward journey till 1999. From the year 2000, the ratio took an upward swing and it continues to fluctuate since then(see figure1 below).

It is obvious that there exist some series of swings in the behaviour of this ratio. Financing of the ratio were classified into three, namely; domestic,
foreign and other funds (this classification is also used by the Central bank of Nigeria)(Busari and omoke,2007). ‘Other funds’ include: Public, Special and Trust Funds, Treasury Clearance Funds, excess reserves, etc. The domestic source comprises the central bank and the non bank public. Other funds (mainly excess reserves) and domestic source were mainly used in financing the deficit. Though there was a rise in the use of foreign source. Over the two years 1989 and 1990, ‘other funds’ were particularly used while since 1990, domestic source have became the major source of financing the deficit (Busari and omoke, 2007).).Figure1 below shows the trends in the fiscal deficit to the gross domestic product (GDP) for Nigeria from 1970 to 2010 From the graph above, it could be seen that government deficit had been on the increase from 1970 to 1995. It took an upward swing from 1996 to 1999 and thereafter  ontinued rapid increase since then.

This therefore calls for investigation to verify the cause and effect of such swing in deficit on macroeconomic variables. Has such persistent deficit financing been able to achieve it’s associated objective? If yes, to what extent?

MACROECONOMIC EFFECT OF GOVERNMENT A BUDGET DEFICIT IN NIGERIA 1970-2011

 

 

1.2 Statement of problem

In the Keynesian point of view, budget deficit is seen as an important instrument of national resources mobilization, allocation and economic management through which domestic output, aggregate demand and macro-stabilization can be promoted, especially when resources are not fully utilized as in the case of Nigeria. In this perspective therefore, budget deficit serves as a medium for growth and stabilization of macroeconomic variables (inflation, debt crisis, private investment via interest rate and exchange crises, unemployment,etc) which collectively develops the economy in a sustained manner. Nigeria embarked on the journey of budget deficit operation since 1960s to enhance and sustain macroeconomic performance. The deficit continued and became worst from 1980s after the oil boom as the revenue associated with the boom could not be sustained. Budget deficit was N93.1million in 1960; and was raised to N473.1million in 1970; N1975.2million in 1980; N22116.7million in 1990; declined to N6752.6million in 1995; and rose to N103,777.3million in 2000; N202,724.7million in 2003(CBN,1970-2003).

The rapid increase has been continuous since then till now. Government was able to sustain these high level of public expenditures between 1970s and 1980s because of the windfall gains from oil during the period. Between 1960s and 80s, the economy was better managed through effective fiscal discipline; leading to stability in macroeconomic activities which is a key objective of fiscal deficit operation. This can be explained by lower inflation rate, exchange rate stability and low debt level during the period. .However, over three decades into Nigeria’s budget deficit with stabilization reform, there is
considerable debate over the conduct of fiscal policy and it’s relation to economic stability, macroeconomic stabilization as a policy objective is far from being achieved (Busari and Omoke, 2007). In this regard, there have been persistent unfavorable balance of payment, Increased public debt, Increased inflationary pressure, High rate of unemployment and continuous dependence on external economy.

All these are indicators of negative growth which is in contrast with budget deficit objectives; and could be attributed to fiscal irresponsibility of the
government. Instead of employing fiscal deficits to finance investment that is self-sustaining, government over the years has devoted very large quantum of the deficits to the financing of consumption expenses which seems to have a dampening effect on the growth rate of the real Gross Domestic Product; price level, debt crises, exchange crises, and thus, have not efficiently stabilized important macro economic variables: giving credence to the monetarist position that budget deficits are counter-productive to economic growth and stabilization. Thus macroeconomic volatility in terms of high variability in non-oil output growth, inflation, interest rate, exchange rate, and so on have renewed the attention of scholars and policy analysts in the issue of fiscal policy and macroeconomic stabilization in Nigeria.

Nigeria has been ruled by military and civilian regimes and operated various policy regimes. Under these regimes, budget deficit has been employed with positive expectations of growth. Unfortunately, it still seems as if target objectives of such policies have not been achieved. Therefore, the dominance of government in economic activity in terms of national expenditure and persistent macroeconomic volatility in key aggregate variable today, calls for a thorough examination to verify the impact of budget deficit on macroeconomic stabilization. One then ask if budget deficit no longer stimulate economic growth. Do researchers believe the Keynesians economists that budget deficit grows the economy through it’s effects on macroeconomic variable or the neo-classical economists that it is counter productive or even the Ricardian economists that it has no positive or negative impacts on the economy? Which side to belong is what this research work is meant to address.

It is increasingly recognized that sustained economic growth is possible only within a sound macroeconomic framework, and that in such framework, fiscal policy plays an important role (fisher and Easterly 1990). It is therefore, suggested that if budget deficits are to generate a positive result, such deficit, must have target investments that are self-sustaining with sound and prudent management of national resources, free from corruption. Hence, this call for a
comprehensive study.

MACROECONOMIC EFFECT OF GOVERNMENT A BUDGET DEFICIT IN NIGERIA 1970-2011