IMPACT OF GOVERNMENT EXPENDITURE ON ECONOMIC GROWTH IN NIGERIA

ABSTRACT

This study investigates the relationship between government expenditure (disaggregated into capital and recurrent) and economic growth in Nigeria using time series data for the period between 1981 and 2021. Government expenditure is an important policy tool that is believed to have a significant impact on the economic growth of a country. The study employed the Error Correction Model (ECM) to estimate the relationship between the dependent and independent variables. The key findings of the study shows that capital expenditure has a positive and significant impact on economic growth long run while recurrent expenditure does not have a significant impact on economic growth both in the short run and long run. Therefore, the study suggests that the government should increase the share of the capital expenditure especially on meaningful projects that has direct impact on the welfare of citizens and prioritize spending on productive sectors of the economy such as education, healthcare, and infrastructure development while reducing wasteful expenditure. Also, government should improve the spending patterns of recurrent expenditure through careful reallocation of resources toward productive activities that would enhance human development in the country. This would create a conducive environment for economic growth and development in Nigeria.