Impact of Government Expenditure on Economic Growth in Nigeria: A Disaggregated Analysis

Abstract

The purpose of this paper was to assess the impact of government capital expenditures on economic growth in Nigeria during 1970 and 2012. A multiple regression model based on a modified endogenous growth framework was utilized to capture the interrelationships among capital expenditures on agriculture, education, health economic infrastructure and economic growth. Drawing on error correction and cointegration specifications, an OLS technique was used to analyze annual time series. Both short and long run effects of government capital expenditures on economic growth were estimated. Government capital expenditures had differential effects on economic growth. Capital expenditures on Agriculture did not exert any significant influence on growth both in the long and short runs. Similarly, the corresponding short-run and long-run impacts on growth of capital expenditures on Education were 0.45 and 0.48, respectively. These results were positive and statistically significant at the 5% level. The short-run impact of health capital expenditures on economic growth was 0.21, while the long-run impact was 0.16. These impacts were negative and insignificant. Expenditures on economic infrastructure had significant positive impacts on growth of 0.28 in the short-run and 0.32 in the long-run. Moreover, these expenditures do not crowd-out private investment. These results indicate that government expenditure on human capital development through the social services sector tended to promote economic growth unlike that on Agriculture. Given that Agriculture still remains a mass major provider of livelihood opportunities, it is still an important channel of economic growth. There is need, therefore, to strengthen the quality and sustainability of, especially, capital expenditures on Nigeria's Agricultural sector.

Impact of Government Expenditure on Economic Growth in Nigeria, 1970-2019

“…This conforms to both the neo-classical and endogenous growth models that emphasized the role of capital in the process of growth and development. The finding is in line with studies conducted by Babatunde (2018) and Nyarko-Asomani et al (2019) and contradicts studies by Saidu and Ibrahim (2019) and Ebong et al (2016).…”

“…Similarly, Ebong, et al (2016) examined the impact of capital and recurrent expenditure on economic growth in Nigeria over the period 1970-2012 using VECM. The result reveals that capital expenditure on infrastructures positively and significantly influences economic growth in both short and long runs.…”

Dynamic Effect of Public Expenditure on Oil Producing Economy: An Empirical Evidence from Nigeria

“…The findings reveal that aggregate government expenditure do not impact significantly on economic growth, while disaggregate government expenditure exerts a significant impact on economic growth. Ebong et al (2016) assesses the impact of government capital expenditure on economic growth in Nigeria using data for 1970 to 2012. The study made use of Ordinary Least Square regression technique.…”

“…While some studies have empirically established the effect of government expenditure on economic growth, outcomes remain inconclusive (Babatunde, 2018;Chude & Chude, 2013;Ebong, Ogwumike, Udongwo, & Ayodele, 2016). Departing from this strand of literature, this study examines the relationship between government expenditure and economic growth in Nigeria based on a modified (Barro, 1990) endogenous growth model while applying recent data.…”

Analysis of Inequality of Economic Development in Districts/Cities Region of Former Kedu Residency in Central Java Province

“…Capital stock or investment is an essential factor in determining economic growth and economic development. With the existence of new investments, there will be additional output and net income in the production factor, so that it will stimulate the rapid economic development activities that ultimately trigger economic growth (Ebong, Ogwumike, Udongwo, & Ayodele, 2016). Investment is the expenditure or shopping of investors or companies to buy capital goods and production equipment to increase the ability to produce goods and services available in the economy so that investment is also called investment.…”