ABSTRACT

This study aims to examine the impact of government expenditure on economic growth in Nigeria from 1981 to 2021. Specifically, it aims to analyze the impact of government expenditure and gross fixed capital formation on Nigeria's economic growth, including investigating the causal relationship between government expenditure and growth.  It utilized a range of econometric techniques, which includes descriptive statistics to summarize the data, correlation analysis to examine relationships between the variables, unit root tests to check for stationarity, cointegration tests to identify long-run relationships, Granger Causality Tests to determine bidirectional causal links between variables, and the ARDL-ECM (Autoregressive Distributed Lag-Error Correction Model) approach to analyze both short-term dynamics and long-term equilibrium relationships amongst the variables. The findings showed that all variable are co-integrated in the long run and thus, have a long term relationship. Using the long-run findings, it was found that government expenditure had   significant effect on economic growth in the long run.  There is no evidence of a bi-directional causality between government expenditure and economic growth in Nigeria. Also, that gross fixed capital formation did not have significant impact on RGDPG in the long run, in Nigeria for the specified period. Therefore, this study recommend; prioritizing efficient recurrent government expenditures for long-term growth; optimizing capital expenditures to ensure cost-effectiveness, and exploring alternative drivers like human capital development and  private  sector  investment  to  diversify  Nigeria's  economy  and  promote  sustainable  growth.