An Empirical Analysis of Government Expenditure and Economic Growth in Nigeria

Abstract

Sustained and equitable economic growth is a major objective of government expenditure policy and as such, it is obligatory of any government to allocate public spending across different sectors of the economy. Unfortunately, over the years Nigeria has been faced with the problem of translating rising government expenditure to meaningful economic growth. This research examined the impact of government expenditure on economic growth in Nigeria for the period 1981–2016. Specifically the impact of government recurrent and capital expenditures were tested using two separate models. The stationarity of the variables were tested to determine the stochastic properties of the series.Also, the co-integration result indicates that the two models each have one co integrating equation. An ordinary least square technique with error correction specifications was used to analyze the data. The result for the model 1indicates that the coefficients of social and economic services were negative while administration was positive and significant.The result for the model 2 indicates that coefficients of administration and social services were negative and insignificant while economic services was positive but insignificant.The study therefore concluded that government expenditure has not translated into meaningful economic growth. On the basis of the above, the paper went on to recommend that government should increase her budgetary allocation to capital projects and ensure effective utilization of such funds. Also, it should increase social services capital expenditure allocation bearing in mind its multiplier effects on long-run economic growth.