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Government Expenditure and Economic Growth in Nigeria: a Disaggregated Analysis

Author

Listed:
  • Samuel Daniel Ugochukwu

    (Ebonyi State University)

  • Lawrence Igwe Oruta

    (Ebonyi State University)

Abstract

Government expenditure is an essential instrument for achieving full employment, price stability, improved standard of living, economic growth and other macroeconomic objectives. However, questions regarding the efficacy of government expenditures to attain these objectives have continued to rise due to the alarming rate of unemployment, inflation, poverty and other socio-economic problems in Nigeria. This has called for the need to investigate the allocation of resources to some selected sectors and their resultant impact on the Nigerian economy. This study examined the effect of various components of Government Expenditures on Economic Growth in Nigeria for periods between 1981 and 2020. The analysis was based on Secondary data. The study adopted the Error Correction model and Granger Causality Test. The short-run model revealed that the components of government expenditures like recurrent expenditures on agriculture, health and education have an insignificant negative impact on economic growth. Recurrent expenditure on debt servicing and road and construction indicated a positive and negligible impact on economic growth. Concerning capital expenditures, government capital expenditures on social services were shown to have a negative and significant impact on economic growth. In contrast, government capital expenditures on economic services indicated a positive and insignificant impact on economic growth in Nigeria. In the long run, all the components of government expenditures employed showed a significant effect on economic growth. The research finding establishes no clear conclusion about whether Keynesian or Adolf Wagner's law is operational in Nigeria. The study concludes that the Nigerian economy is on the wrong path to sustainable growth and development. The study recommends that the government should increase its allocations to priority sectors like health, education, agriculture and infrastructures. Furthermore, the government should stimulate investment and output using monetary and fiscal policies to increase internally generated revenue and reduce government borrowing. Lastly, the study emphasises the need to improve government spending efficiencies, transparency in budgetary processes, and strict monitoring of government projects. JEL Classification: E31

Suggested Citation

  • Samuel Daniel Ugochukwu & Lawrence Igwe Oruta, 2021. "Government Expenditure and Economic Growth in Nigeria: a Disaggregated Analysis," Traektoriâ Nauki = Path of Science, Altezoro, s.r.o. & Dialog, vol. 7(11), pages 4022-4035, November.
    • Handle: RePEc:pos:journl:76-4
    DOI: 10.22178/pos.76-6
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    Cited by:

    1. Olalekan Charles Okunlola & Imran Usman Sani & Olumide Abiodun Ayetigbo & Olajide O. Oyadeyi, 2024. "Effect of government expenditure on real economic growth in ECOWAS: assessing the moderating role of corruption and conflict," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-15, December.

    More about this item

    Keywords

    government expenditures; social services; financial services; human capital development; economic growth;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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