Investigating the Expenditure-Economic Growth Nexus in Nigeria the Presence of Structural Breaks: A Nonlinear ARDL Cointegration Approach

The performance of Nigeria’s economy has not been satisfactory despite the remarkable increase in government spending (expenditure) over the years. This development warrants re-examination of the relationship between government expenditure and economic growth in the presence of structural breaks. The main objective of this study is to re-evaluate the expenditure and growth nexus in Nigeria using the Nonlinear Autoregressive Distributed Lag cointegration approach on annual time series data from 1970-2019. The cointegration result revealed asymmetric cointegration between government spending and economic growth (long-run nonlinear relationship). The results also illustrated that a positive change in government spending has a positive and statistically significant effect on economic growth while a negative change has no significant impact on economic growth during the study period. In addition, in support of the Keynesian hypothesis, the study found unidirectional causality running from government expenditure to economic growth. Thus, the paper concludes that Nigeria’s economic growth is more responsive to a positive change in government spending than a negative change. Following these findings, the paper recommended increasing government spending to be channeled to provide critical physical infrastructure, human development, Research, and Development (R&D). /p>