INVESTIGATING THE RELATIVE IMPACT OF GOVERNMENT EXPENDITURE ON ECONOMIC GROWTH IN NIGERIA

Abstract

This research work empirically examined the relationship between government expenditure and economic growth in Nigeria for the period 1981-2020. Ex-post facto research design was adopted in the investigation. Multiple regression analysis was employed, in which Auto-Regressive Distributed Lag (ARDL) model was the method of analysis utilized in the research. The ARDL model evaluates long-run and short-run interactions among the specified variables. The unit root tests conducted using Augmented Dickey-Fuller (ADF) revealed that the time series variables used were stationary at level and the first difference, but none of the variables was stationary at the second difference. The ARDL – Bound test analysis revealed the existence of long-run equilibrium relationship between government expenditure and economic growth in Nigeria within the period of the study. The coefficient of error correction
mechanism was statistically significant and also negatively signed. The results equally showed that in the short run, government recurrent expenditure was statistically insignificant but positively related to economic growth; while government capital expenditure which was statistically significant, related negatively to economic growth in Nigeria. However, at the long run, both government recurrent and capital expenditures were statistically significant; but while recurrent expenditure indicate positive relationship with economic growth, capital expenditure maintained negative relationship with economic growth in Nigeria. Based on the findings, the study therefore recommended in strong terms that more resources should be channelled to recurrent expenditure as it will stimulate economic growth. Secondly it recommended that capital expenditure should be effectively and efficiently deployed through constant
monitoring and audit.