The Impact Of Infrastructure On Economic Growth In Nigeria

Project and Seminar Material for Economics

The Impact Of Infrastructure On Economic Growth In Nigeria


Abstract


This research work attempts to provide empirical evidence of the impact of infrastructure on economic growth in Nigeria. The research work made use of the ordinary lease square (OLS) technique to capture the effect of infrastructure on economic growth. This work covered a period of 31 years from 1980-2011. The finding shows that infrastructure has great impact on the economic growth of Nigeria. In other words, increase investment in infrastructure will lead to corresponding increase in economic growth. The study also shows that increase in the provision of health and education infrastructure facilities has a positive and statistically significant relationship with economic growth. The researcher recommends that in order for Nigeria to meet its vision 2020 agenda it has to increase and improve the infrastructure base.


Chapter One


Introduction

1.1 Background of the Study

The economic growth and development of a country is reflected in the increase in its productive capacity i.e potential increase in the goods and services produced by its factors of production. It reflects also in the level of efficiency in the allocation of factors of production and output among different economic agents in the country. The ability to maintain the aforementioned depends on many supporting services and facilities that are available in the economy and which are usually referred to as “infrastructures”. Infrastructure constitutes a basic important service that should be put in place to enable growth to occur in a country. Socio-economic development can be facilitated and accelerated by the infrastructure like education, electricity, transportation, communication and good health. If these various infrastructures are not put in place, growth will be very difficult. The provision of infrastructure such as (education, power, communication, transportation and health) would expand productive capacity of the economy and increase the goods and services in the country. Many studies have shown that in order to enhance growth and development in developing economies, investment in infrastructure is an imperative need. For example Canning and Petroni (2004) investigated the long run impact of infrastructure provision on per capital income in a panel of countries over the period of 1950 to 1992 and provided evidence that in majority of cases infrastructure stimulate long run growths effects. And that a strong association exists between the availability of certain infrastructure and per capita GDP investment in infrastructure has a direct and indirect effect in the economy. The direct effects comes from the fact that in the initial stage of the provision of infrastructure in any economy or nation, in order to create roads, electricity, communication, transportation and health, short term jobs would be created in the sense that labour would be used in the building of roads, electricity etc. the indirect effect occurs in the long-run after the various infrastructure has been put in place to foster the production capacity of goods and services in any given economy. (Ayanwu, 2009).Awoseyila (1996), maintained that inadequate provision of infrastructure leads to low level of investment and high cost of goods and services in Nigeria. The inability of the Nigerian government to provide or mobilize enough financial resources to undertake the provision of adequate infrastructure for economic growth and development could result in low level investment and high rate of unemployment coupled also with increase in the poverty level of the country. John Black defined infrastructure as the capital equipment used to produce publicly available services, including transportation, telecommunication, power, health services and education. In economic terms, growth has traditionally meant the capacity of a national economy, whose initial economic condition has been more or less static for a long term, to graduate and sustain an annual increase in its gross national product (GNP) at rates of 5 per cent or more Ndukwe (2004). From the above it can be pointed out that delivery of services like water, sanitation, transportation and energy directly benefit households and can dramatically improve their welfare and contribute to their productivity. Many of the benefits of infrastructure services accrue to firms: infrastructure through services lowers production costs (transportation and communication services), expands market opportunities (especially transport and telecommunication sub-sectors) that positively affect competitiveness and production and lead to economic growth. Similarly, the goals related to human development (education and health) rely on services that require supportive infrastructure-water and sanitation to prevent disease, electricity to serve schools and health clinics, and roads to access them. It should be said that the relationship and investments to economic development is very heterogeneous and investment to infrastructure stimulate growth and at the same time higher growth often leads to higher demand for infrastructure.


1.2 Statement of the Problem

Availability of infrastructure is expected to be one of the major objectives of any government. This is so because of its level of importance. This infrastructure sub-sector serves as a lubricant for efficiency of other sectors in an economy. Hence over the years, the unavailability of social and economic infrastructure has gone a long way to hinder the functioning of the other sectors of the economy as a whole. Industries facing global competiveness depend more and more on modern and efficient local infrastructure to enhance low operational cost and high quality services. Traditionally, the construction and operation of infrastructural facilities (education, electricity, communication transportation and health) has been the exclusive domain of the public sector but in recent years, however, this has been the surge in the demand for private financing of infrastructure due to several factors:

  • Lack of government financial resources to maintain appropriate levels of investment.
  • New demand, both in terms of sophistication and broad spectrum of infrastructure services
  • A decline in concessional and (both bilateral and multilateral) for infrastructure projects, and
  • Dissatisfaction by the local population and industry with the level and services of existing infrastructure services which has been principally due to inefficient public sector administration.

The trend in infrastructure development has been very disappointing over the years especially when considering the standard of infrastructure services in the country. This raises concern about the measures taking by government to improve infrastructure provision. Unfortunately it is seen that concerned efforts made by the government to revitalize the infrastructure sector has been perceived not to enough. This problem has been lingering from time to time despite the various programmes taking by the government such as River Basin Development Authorities (RBDA), Nigerian Building and Road Research institute (NBRRI) as well as Rural Water Supply and Sanitation Programme (RWATSAN). It is therefore the concern of this study to investigate into the limiting factors that affect infrastructure development in Nigeria. And also, to access the contribution of infrastructural development to economic growth in Nigeria.


1.3 Objective of the Study

The broad objective of this study is to ascertain the role of infrastructure in the actualization of a sustainable economic growth in Nigeria. A way of doing this is to measure the effects of socio-economic infrastructure facilities on the growth process of the economy expected to hold for a very long term so much so that it catapult into the pace of economic growth.

The specific objectives are:

  1. To examine the influence of government expenditure on health and economic growth in Nigeria.
  2. To examine how education has been able to influence economic growth.
  3. To analyze the trend of economic growth and infrastructure growth in Nigeria

1.4 Research Hypotheses

For the successful completion of the study, the following research hypotheses were formulated by the researcher;

  1. H0: There exist no significant relationship between infrastructural provision and economic growth in Nigeria.
    H1: There exist a significant relationship between infrastructural provision and economic growth in Nigeria.
  2. H02: There is no influence of government expenditure on health and economic growth in Nigeria.
    H2: There is influence of government expenditure on health and economic growth in Nigeria.

1.5 Significance of the Study

This study will give clear insight of the impact of infrastructure on economic growth. The study will be beneficial to students and the Nigeria economy. It will also serve as a reference to others researcher that will embark on this topic


1.6 Scope and Limitation of the Study

The research work focuses on economic infrastructure of the Nigerian economy; it takes into consideration two infrastructure services which are health and education. The researcher encounters some constrain which limited the scope of the study;

a) Availability of Research Material:

The research material available to the researcher is insufficient, thereby limiting the study

b) Time:

The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.

c) Organizational Privacy:

Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities


1.7 Definition of the Study

Infrastructure:

Infrastructure is the fundamental facilities and systems serving a country, city, or other area, including the services and facilities necessary for its economy to function

Economic Growth:

Economic growth is the increase in the inflation-adjusted market value of the goods and services produced by an economy over time. It is conventionally measured as the percent rate of increase in real gross domestic product, or real GDP.


1.8 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows

  • Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study.
  • Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature.
  • Chapter three deals on the research design and methodology adopted in the study.
  • Chapter four concentrate on the data collection and analysis and presentation of finding.
  • Chapter five gives summary, conclusion, and recommendations made of the study

Chapter Five


Summary, Conclusion and Recommendation

5.1 Introduction

It is important to ascertain that the objective of this study was to ascertain the impact of infrastructure on economic growth. In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of the infrastructure on economic growth


5.2 Summary

This study was on the impact of infrastructure on economic growth: a case study of Nigeria (1980-2011). Three objectives were raised which included: To examine the influence of government expenditure on health and economic growth in Nigeria, to examine how education has been able to influence economic growth, to analyze the trend of economic growth and infrastructure growth in Nigeria. In line with these objectives, two research hypotheses were formulated and two null hypotheses were posited. The total population for the study is 200 staff of national bureau of statistics. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made statisticians, accountants, administrative staff and junior staff were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies


5.3 Conclusion

The linkage between infrastructural development and economic growth outcomes is one of the most popular topics for debates in recent scientific literature and economic research. The role of infrastructure is widely analysed as very vital to household and firms as availability and quality of infrastructure result in different decisions to invest and may influence migration, business establishment location. Although, the result of the two estimations speak that infrastructural development has a positive linkage with our economy growth but, the researchers believe this is in term of availability and quality of infrastructure in our economy .And also, the magnitude of the contribution leaves a lot to question. This questionable contribution or lack of quality infrastructural development has been seen in the relocation of some firms out of Nigeria to other neighbouring countries like Ghana etc. The relocation of some firms out of Nigeria which is as a result of weak quality of our infrastructure base has not only affected the economy negatively in the short run but also in the long run which are manifesting in a lot of social/ youth restiveness like Niger Delta militancy, boko haram in the North to mention but a few.


5.4 Recommendation

Infrastructure development is one of major elements of structural reforms in developing economy like Nigeria because of its expected large economic and social impact. As can be inferred from the studies by other researchers, infrastructure investments alone do not have a significant influence on economic growth. The institutional environment is a very important complement, allowing infrastructure investments to be translated into economic growth. Based on this, the following are the recommendations of this study: In the area of transportation, more roads should be constructed and the existing one adequately maintained particularly the ones already taken over by gully erosion as it will lead to the reduction of production of firms as well as inability of the firms to evacuate consumables both final and intermediate from rural to urban centers.


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