Public Expenditure And Economic Growth In Nigeria

ABSTRACT

This study examined the impact of government expenditure on economic growth in Nigeria. Specifically, the study investigated the impact of capital expenditure on administration, transfers, economic, social and community services. And also impact of recurrent expenditure on administration, transfers, economic, social and community service on the growth of Nigeria economy. Time series data from 1981 to 2018 from the Central Bank of Nigeria (CBN) statistical bulletin were collected, analyzed and tested. The ordinary Least Squares (OLS) estimation technique was used in the estimation of the specified models within the framework of the Error Correction Modelling (ECM). Results of the cointegration tests showed that the variables were cointegrated and hence there existed long run relationship among the variables in the estimated equations. The results of the short run estimation showed that public capital and recurrent expenditures on administration have negative impact on economic growth in Nigeria. Capital and recurrent expenditures on economic services impacted positively on economic growth in Nigeria. Similarly, capital expenditure on social and community services impacted positively on economic growth in Nigeria, while recurrent public spending on social and community services impacted negatively on economic growth in Nigeria. Lastly, government capital and recurrent expenditures on transfers impacted positively on economic growth in Nigeria. Based on the results of findings, the study recommended firstly, that government should increase its spending on the sub-components of administration like defence, law and order, security, and other components of administration that could have positive impact on economic growth. Secondly, the government should increase expenditure on economic services such as agriculture, construction, transportation, communication, electricity, mining, quarrying, manufacturing, banking and other economic services. Thirdly, there is also need for the government to increase its expenditure on social services such as education, health, water resources, sanitation, rural development, health care, housing, roads and other social services components. Lastly, the government should increase its expenditure on transfers such as pensions, gratuities, bursaries, subsidies, welfare, subventions, contingency and grants as their increment will boost consumption and hence economic growth in Nigeria.