International Journal of Economics and Business Administration
Articles Information
International Journal of Economics and Business Administration, Vol.6, No.1, Mar. 2020, Pub. Date: Feb. 14, 2020
Effect of Government Expenditure on Economic Growth in Nigeria (1986-2018)
Pages: 12-17 Views: 83 Downloads: 36
Authors
[01] Muhammad Dahir Ahmad, Department of Economics and Management Science, Nigeria Police Academy, Wudil-Kano, Nigeria.
[02] Yunana Yakubu Aku, Department of Political Science, Faculty of Social Sciences, Nasarawa State University, Keffi, Nigeria.
[03] Wada Mato Rantan, Department of Economics and Management Science, Nigeria Police Academy, Wudil-Kano, Nigeria.
[04] Yunana Titus Wuyah, Department of Economics and Management Science, Nigeria Police Academy, Wudil-Kano, Nigeria.
Abstract
Despite the rise in government expenditure in Nigeria over the years, there are still public outcries over decaying infrastructural facilities, low gross domestic product, and general economy stagnation. This study investigates the effect of government expenditure on economic growth in Nigeria using time series data spanning 1986-2018. The data were sourced from Central Bank of Nigeria Statistical bulletin for various years. The data were subjected to unit root test and co-integration. Ordinary Least Squared Regression technique was carried out to see the effect of government expenditure on economic growth during the period under review. The explanatory variables in the model are government capital expenditure (GCE), government recurrent expenditure (GRE), money supply (MS), gross fixed capital formation (GFCF) and labour force participation rate (LAF) while the dependent variable is economic growth proxy by gross domestic product (GDP). The unit root result reveal that GDP, GRE, MS and LABF were stationary after first difference while GCE and GFCF were stationary at levels. Co-integration result also indicates that trace and maximum eigen-value statistics show the null-hypothesis of co-integrating is rejected at both 5% and 1% levels of significance. The trace test suggests two co-integrating equations at 5% and one co-integrating equation at 1% while the maximum eigen-value statistics suggests one co-integrating equations at both 5% and 1% levels of significance. Since there is an indication of at least two to three co-integration equations out of five, we conclude that there exists a long run equilibrium relationship between government expenditure and economic growth in Nigeria. Finally, the regression results reveal that government capital expenditure and government recurrent expenditure has a positive and significant impact on economic growth. Government expenditure drives economic growth in Nigeria and the study recommends that more of government’s resources should be directed to especially capital expenditure and recurrent expenditure in terms of income to increase aggregate demand.
Keywords
Government, Expenditure, Economic Growth, Capita, Recurrent
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