IMPACT OF GOVERNMENT EXPENDITURE ON THE RATE OF INFLATION THROUGH ECONOMIC POLICY

A REGULATION OF MARKET FORCES

BACKGROUND OF THE STUDY

            Inflation rate has continued to rise in Nigeria over the years, consumer goods are scarce and output supply hardly ever comes close to meeting the demand of consumers. The value of the Nigerian currency (i.e., the Naira) is unstable and fluctuates in the down ward direction. Government, year by year announces budgets and policies whose objectives include the reduction of the inflationary rate.

Despite the desperate measures taken so far, inflationary rate still persist. Like in the case of petroleum products, price of the products increases everyday and invariably leads to further fail in standard of living of the citizenry. Irrespective of the amount one earns, the impact is necessarily the same, though, more money tends to make up for some of the effects.

            Therefore, the problem of inflation affects not only the economy, but also the structural development of the economy. Inflation is attributed to a number of factors among which are falling OUTPUT levels. Increases in transfer payments, government polices. Economic dependence on foreign input and so on though, the majority of the masses blame the government for the macro economic problem of the economy. This is done whether or not peoples underhand the dynamic nature of political economy or the relationship between the activities of government and inflations. Hence, the essence for this study is to investigate the relationship between government expenditures and inflation rate in Nigeria.

Statement of the Problem  

            The continued rise in general price level in Nigerian economy seems persistent and uncontrollable. From available evidence and statistics, which show a lingering presence of an increasing inflationary rate there is no administration in the country that has not had to address this problem and aim towards it reductions. This problem of inflation hinders economic activities. It has dons this time past and the trend continues. Government, yearly propose policies to find lasting solution to this persistent problem of inflation using macro economic policies and other management technologies.

            The fact that this obstacles, inefficiency in economic activity, growth and development persistence points to the fact that root causes have been identified, they have not been rightly tackled.

            Attempts made by authorities to tackle this problem and solving it induced the researcher towards conducting this study, another significant or prompting for this study is found in the debates on the future of economic policies to resolves the inflationary, problem but he debate covers the issues of why government expenditure activities has failed to reduced the inflationary rate in the in the economy. It is against this background that this study is being envisaged.

Objectives of the Study                         

            The objectives of carrying out this research work are:

1.                  To determine whether there is a relationship between government expenditure and the rate of inflation in Nigeria.

2.                  To assess the impact of government expenditure on the rate of inflation.

3.                  To proffer solution towards improving economic policy based on finding of the study

4.                  To ensure adequate regulation of market forces.

5.                  To ensure equitable income distribution in Nigerian economy.

Hypothesis of the Study  

            This study is guided by the following hypothesis

H0 b i = 0 => there is no significant relationship between government expenditure and inflation rate in Nigeria.

Hi Bi N 0 => there is significant relationship between government expenditure and inflation rate in Nigeria.

Significant of the Study 

            The importance of this study covers every arm of it. The study is intended to provide an understanding of the relationship between government expenditure and rate of inflation, in this light it will provide scholars with more intellectual raw materials for further studies. This is so because the study will facilitate the understanding of the importance of government expenditure in macro economy policy. Since the problem concerns the entire society and the policies formulated and implemented by the government have a multiplier effect on the whole economy, the society will benefit from this study since its findings will help in tackling the problem.

Scope and Limitation of the Study

            The purpose of this study is to determine the relationship between inflation and government expenditure in Nigeria from 1980-2019.

            The successful implementation of this study was constrained by factors like.

1.                  Lack of financial resources

2.                  Limited accessibility to data and literature

3.                  Limited time for the research work.

Definition of some Terms    

            Inflation: This refers to the persistence rise in the general price level of goods and services over a period of time.

·            Government Expenditure: This refers to the money government spends in carrying out recurrent and capital expenditures in a country.

·            Macro Economic Policies: These are government policies adopted to regulate the aggregate socio-economic activities in the country.

·            Economic Development: The processes where a country’s real per capita Gross National Product (GNP) or income increases over a sustainable period of time through continuous increase in per capita productivities.

·            Stagflation: This is a situation in which rapid inflation is accompanied by declining output and unemployment.

Galloping Inflation: This is a situation in which prices rise so rapidly that money quickly loses its value with the attendant loss of confidence in the monetary system by people.