RE-EVALUATION OF GOVERNMENT EXPENDITURE ON ECONOMIC GROWTH IN NIGERIA

Abstract

This study investigates the relationship between government expenditure and economic growth in Nigeria spanning the period from 1981 to 2022. The role of government expenditure in fostering economic growth is crucial, particularly in developing countries like Nigeria. However, the impact of government expenditure on economic growth in Nigeria has been relatively low. This deficiency has been attributed to several factors, including inadequate attention to improving capital expenditure, issues of corruption, the economic recession of 2009, prolonged military rule from 1966 to 1999, and heavy dependence on the oil sector as the primary revenue source for the economy. The study employed a descriptive research design. Gross domestic product (GDP) served as the dependent variable, while government recurrent expenditure, government capital expenditure, and gross capital formation were utilized as independent variables. The analysis confirmed that these variables were stationary and integrated of order one based on the Augmented Dickey-Fuller test. The Johansen co-integration test indicated a long-run relationship between government expenditure and economic growth in Nigeria. The Vector Error Correction Model (VECM) results revealed that government recurrent expenditure and government capital expenditure exerted negative and significant impacts on economic growth, whereas gross capital formation had a positive and significant impact. Based on these findings, the study recommends that the Nigerian government implement measures to address shortcomings in various sectors. Improving government recurrent expenditure could stimulate economic activity and contribute
to overall economic growth. Furthermore, efforts should be directed towards promoting and enhancing gross capital formation and domestic investment to support the development of small and medium-scale enterprises across the country.