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Difficulty: MediumPublic Expenditure Classification and Growth

In a fiscal year budget, a state government allocated its total public expenditure of ₦500 billion as follows:

Expenditure ItemAllocation (₦ Billion)
Civil servants' salaries and allowances175
Construction of roads, hospitals, and schools150
Payment of interest on public debt75
General administrative overheads100

What is the percentage share of capital expenditure in the total public expenditure?

Answer: 30 %

Answer

The percentage share of capital expenditure in total public expenditure is 30%.
Capital expenditure comprises government spending dedicated to infrastructure and physical asset creation (roads, hospitals, schools = ₦150 billion). Total spending is ₦500 billion. The percentage share is calculated as (150 / 500) × 100 = 30%.

Step-by-Step Solution

1
Classify expenditure items into capital and recurrent spending.
Capital expenditure = ₦150 billion (construction of roads, hospitals, and schools). Recurrent expenditure = ₦175 billion (salaries) + ₦75 billion (debt interest) + ₦100 billion (overheads) = ₦350 billion.
Capital expenditure involves spending on non-current physical assets that provide long-term economic returns, whereas recurrent expenditure covers day-to-day operational costs and debt service obligations.
2
Confirm total public expenditure.
Total expenditure = ₦150 billion + ₦350 billion = ₦500 billion.
Total public expenditure is the sum of total capital expenditure and total recurrent expenditure.
3
Calculate the proportion of capital expenditure as a percentage.
(₦150 billion / ₦500 billion) × 100 = 30%.
Dividing capital expenditure by total public expenditure yields the share, which is converted to a percentage by multiplying by 100.

Key Concept

Public expenditure classification into capital and recurrent categories and calculation of budget shares.
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Topics

Public Expenditure Classification and Growth

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