GOVERNMENT SPENDING AND ECONOMIC GROWTH IN NIGERIA (1980-2011)

Abstract

Using time series data of 32 years period (1980-2011), this study investigated the impact of government spending on the Nigerian economic growth. Employing the ordinary least square multiple regression analysis to estimate the model specified. Real Gross Domestic Product (RGDP) was adopted as the dependent variable while government capital expenditure (GCEXP) and government recurrent expenditure (GREXP) represents the independent variables. With the application of Granger Causality test, Johansen Co-integration Test and Error Correction Mechanism, the result shows that there exists a long-run equilibrium relationship between government spending and economic growth in Nigeria. The short-run dynamics adjusts to the long-run equilibrium at the rate of 60% per annum. The policy implication is that that both the short-run and long-run expenditure has significant effect on economic growth of Nigeria.In line with the findings, we recommendthat Government increase both capital expenditure (in building of roads, power supply, transport, and communication) and recurrent expenditure mostly on issues that should attract economic growth. Funds meant for development of the Nigerian economy should be properly managed by the executive arm to boost employment as well as improve the wellbeing of citizens since this will cause economic growth indirectly.