Defense-Education Expenditure Nexus in Economic Growth of Nigeria

Defense-Education Expenditure Nexus in Economic Growth of Nigeria

Richardson Kojo Edeme (University of Nigeria Nsukka, Nigeria)
DOI: 10.4018/978-1-5225-4778-5.ch017

Abstract

As defense expenditure in Nigeria has become considerably high, the concern is whether the burden of such expenditure might adversely influence economic growth through its ability to reduce expenditure on education, which is a key sector that accentuates economic growth. This chapter, therefore, analyzes the deleterious effects of defense expenditure on education expenditure in relation to economic growth of Nigeria. The estimated model finds that defense expenditure exerts negative effect on education expenditure. This implies that reducing defense expenditure would not only be good for economic growth but also directly contribute resources into the education sector of the Nigerian economy. The authors also observe the need to reduce expenditure on defense for the development of other social sectors.
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Introduction

Since the seminal work of Benoit (1973, 1978) which suggested that military spending had a positive impact on economic development derived from the existence of spill-over effects, significant number of studies have been conducted on the empirical relationship between military expenditure and economic growth in both developed and developing economies. There is convincing empirical evidence in favour of a positive effect of military expenditure on long-term growth as well as the causal link between them. However, there is little evidence on the deleterious impact of military expenditure on economic and social services that have been found to engender growth. The discord as per the effect of military expenditure on education expenditure and economic growth, and the rising military expenditure in Nigeria in recent time has been a major concern to researchers and policy makers. This uncertainty prompted this chapter to examine how the large amount of military expenditure has impacted on economic growth through reduction on education expenditure. The essence is to determine whether military expenditure is one of the economically non-contributive activities in Nigeria economy as argued by Dumas (2002).

Military expenditure in Nigeria has been on the increase over the last few decades. For instance, defence expenditure as a percentage of the total Federal Government budgetary provision was 10.1% in 2003 and 11.9% in 2004. However, it declined to about 11.2% in 2005 but rose again to 14.7% in 2006. In 2007, military expenditure was N1.2 billion, which represent about 0.6% of the total GDP. It increased to N15.4 billion in 2008 and later N45.4 billion in 2009. Since then, the trend of military expenditure has taken an upward drift. In 2012, it rose to about N345 billion which accounted for about 1.0% of the country’s GDP. In comparison, education expenditure which was N15.4 million in 2003 increased to N16.8 million in 2004 and rose further to N23.7 million in 2005. In 2006, 2007, 2008, 2009, 2010. 2011, 2012 and 2013, federal government expenditure on education was N27.8 million, N56.6 million, N62.5 million, N69.0 million, N69.2 billion, N72.6 billion, N75.8 billion and N72.9 billion respectively. In 2015, Nigeria government allocated N285 billion to defence which is about 13% higher than the amount allocated for 2014 (CBN, 2016). Meanwhile, the allocation to essential services such as education and health has been experiencing a rapid decline with fumbling and tumbling economic growth as depicted in Table 1.

Table 1.
Government total expenditure, expenditure on education, education expenditure as % of total, expenditure on defence, defence expenditure as % of total, GDP and real GDP in Nigeria, 2010-2015
PERIODGTXGXDGXDGDPGXEGXEGDPRGDPRGDPG
20103109.4371198.710546.3906170.85.4930776332.217.4283
20113314.5133283.28.5442335.810.1312834000.836.5818
20123325.1565296.88.9259348.410.4777888893.006.8873
20133214.955272.325548.4706390.424912.1440950114.031.3878
20143426.9408274.530478.0109343.754910.0310963300.002.0035
20153831.9778330.598.6271325.198.4862982600.00-100

Source: CBN Statistical Bulletins, various Issues; Note: GTX=government total expenditure; GXE= expenditure on education; GXEGDP= education expenditure as % of total expenditure; GXD = government expenditure on defence; GXDGDP = defence expenditure as % of total,GDP = Gross domestic product, RGDP = real growth in GDP. All variables are in millions

Key Terms in this Chapter

Economic Growth: Increase in Nigeria’s capacity to produce goods and services (gross domestic product), compared from one period of time to another.

Social Sector: This comprises education and health sectors of the economy.

Government Revenue: This is the total revenue generated by the government is a fiscal year for the maintenance of itself and the society.

Growth-Enhancing Sectors: These are sectors that accentuates economic growth.

Human Development: This entails improvement in human welfare through advancement in knowledge, sustainable environment, and expression of freedom to live longer and healthier and creative life.

Level of Development: This is the share of the country’s population involved agriculture.

Education Expenditure: Amount spent by the federal government on public educational institutions and other education related institutions.

Defense Expenditure: The amount that a country spends on military measures or resources.

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