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Government Infrastructure Expenditure and Investment Drive in an Emerging Market Economy: Evidence from Nigeria

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  • Chukwuebuka Bernard Azolibe
  • Jisike Jude Okonkwo
  • Patrick Kanayo Adigwe

Abstract

Government infrastructure expenditure in an emerging market economy is critical for stimulating investment that will, in turn, foster economic growth. Given the recent growth in government infrastructure expenditure and the present deplorable state of infrastructure in Nigeria and in most emerging market economies, it becomes necessary to investigate whether the increasing government infrastructure expenditure actually drives both domestic investment and foreign direct investment (FDI). Thus, this study aimed at ascertaining whether government expenditure on roads infrastructure, transport infrastructure, defense infrastructure, and health-care infrastructure has significant positive relationship with the level of domestic investment and FDI in Nigeria. This study also employed econometric techniques in its investigation such as the unit root test, co-integration test, and error correction mechanism (ECM) in the estimation of the relevant relationships. The result of the co-integration test revealed that there exist long-run relationships between the variables in the models. The result of the short-run coefficients of the error correction estimates showed that government expenditure on road, transport, defense, and health infrastructure has positive relationship with domestic investment and FDI. However, this relationship was found to be insignificant. Thus, we conclude that government infrastructure expenditure is a good driver of investment in an economy.

Suggested Citation

  • Chukwuebuka Bernard Azolibe & Jisike Jude Okonkwo & Patrick Kanayo Adigwe, 2020. "Government Infrastructure Expenditure and Investment Drive in an Emerging Market Economy: Evidence from Nigeria," Emerging Economy Studies, International Management Institute, vol. 6(1), pages 61-85, May.
    • Handle: RePEc:sae:emecst:v:6:y:2020:i:1:p:61-85
    DOI: 10.1177/2394901520907722
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    References listed on IDEAS

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    2. Stephen K. Dimnwobi & Favour C. Onuoha & Benedict I. Uzoechina & Chukwunonso Ekesiobi & Ebele S. Nwokoye, 2022. "Does Public Capital Expenditure Reduce Energy Poverty? Evidence from Nigeria," Working Papers 22/033, European Xtramile Centre of African Studies (EXCAS).
    3. Okoli, Uju Victoria & Prof (Dr.) Ram Milan & Ezenwobi, Ngozi Flourence, 2024. "Government Expenditure and Sap in Nigeria: An Empirical Perspective," International Journal of Research and Scientific Innovation, International Journal of Research and Scientific Innovation (IJRSI), vol. 11(5), pages 1035-1049, May.
    4. The Nguyen Huynh, 2022. "Dynamic spatial effects of determinants of foreign direct investment: A case of the southern key economic region of Vietnam," Australian Economic Papers, Wiley Blackwell, vol. 61(3), pages 436-454, September.

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