Abstract

Abdulrasaki Saka

An important question is asked about the relationship between output and monetization of public servants wages and salaries structure: are variations in public servants wage and salaries plus monetization of fringe benefits transmitted to increase output, and do these variations in output constitute an important component of variations in monetization? Total recurrent expenditure is regressed on wages and salaries and fringe benefits of public servants, monetization and real domestic absorption using General Moment Method (GMM). Again, the cost of governance equation which induces monetization is regressed on recurrent expenditure, labor and capital variables merged into one, capital stock and new salary package. The third equation expresses output as a function of cost of governance taking into account the possible effects of inflation, interest rate and new salary packed which include monetization booty. The empirical analysis is based on data from the Central Bank of Nigeria statistical Bulletin for the period of 1985 to 2010. The results show that wages and salaries, fringe benefits of public servants and monetization contribute significantly to recurrent expenditure while the real domestic direct resources away from recurrent expenditure towards capital expenditure. Again, variations in recurrent expenditures are transmitted; they constitute the dominant component in the variations of cost of governance. In the output estimates, new salary package which has monetization as an important component varies in the right direction with output, and the implication is that new salary package through monetization increases productivity and output.