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Examining the Relationship between Government Spending and Economic Growth in Nigeria: An Application of Wagner’s Law Hypothesis

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  • Ibrahim Sahabi Muhammad

    (Department of Economics, Shehu Shagari University of Education, Sokoto – Nigeria)

  • Muhammad Sabir Ibrahim

    (Department of Economics (PG Student), Usmanu Danfodiyo University, Sokoto – Nigeria)

Abstract

This paper examined the relationship between Government Spending and Economic Growth in Nigeria with special reference to Wagner’s Law Hypothesisusing annual data that spanned from 1981 to 2022. By examining the relationship between governments expenditure and the annual growth rate of GDP. The study sourced its data from the Central Bank of Nigeria’s statistical bulletin 2022, and first, examines the stochastic properties of the variables through the Augmented Dickey-Fuller (ADF) test. The result reveals that, the data series are stationary at level. The hetero skedasticity test through Breusch-Pagan-Godfrey and Serial Correlation through the Breusch-Godfrey LM Test were performed and the long-run relationship between the variables has been examined through regression model (OLS). The result of the model reveals that government expenditure are significant in explaining GDP, this implies that government expenditure and GDP have a statistically significant long-run relationship, and thus, concluded in support of the validity of Wagner’s law for the Nigerian economy. It’s therefore, recommended that the Nigerian government should step up its effort in ensuring proper management of its resources and invest more inlabor-intensive sectors like agriculture. Social Science (IJRISS)

Suggested Citation

  • Ibrahim Sahabi Muhammad & Muhammad Sabir Ibrahim, 2023. "Examining the Relationship between Government Spending and Economic Growth in Nigeria: An Application of Wagner’s Law Hypothesis," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(11), pages 125-133, November.
    • Handle: RePEc:bcp:journl:v:7:y:2023:i:11:p:125-133
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    References listed on IDEAS

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    1. Irena Szarowská, 2012. "Public spending and Wagner's law in Central and Eastern European countries," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 60(2), pages 383-390.
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    3. Alan T. Peacock & Jack Wiseman, 1961. "The Growth of Public Expenditure in the United Kingdom," NBER Books, National Bureau of Economic Research, Inc, number peac61-1.
    4. Antonio N. Bojanic, 2013. "Testing the Validity of Wagner's Law in Bolivia: A Cointegration and Causality Analysis with Disaggregated Data," Revista de Analisis Economico – Economic Analysis Review, Universidad Alberto Hurtado/School of Economics and Business, vol. 28(1), pages 25-45, April.
    5. M. Adetunji Babatunde, 2011. "A bound testing analysis of Wagner's law in Nigeria: 1970-2006," Applied Economics, Taylor & Francis Journals, vol. 43(21), pages 2843-2850.
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