Exploring the Impact of Government Spending on Economic Growth in Nigeria
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Background of the Study
Government spending is widely regarded as a pivotal instrument for economic development, particularly in emerging economies. In Nigeria, public expenditure has been central to initiatives aimed at modernizing infrastructure, enhancing social services, and stimulating economic activity. Over the period 2023–2025, significant government spending initiatives have been rolled out to address developmental challenges and diversify the economy away from an overreliance on oil revenues. Recent literature underscores the potential of targeted public expenditure to spur growth by creating jobs, boosting productivity, and attracting private investments (Olubunmi, 2023).
In Nigeria, increased government spending is believed to generate multiplier effects that extend well beyond the initial outlay. For instance, investments in infrastructure and education can enhance human capital, while expenditures on health and social services contribute to a more productive workforce. These spending programs are also instrumental in addressing regional disparities and fostering inclusive growth. However, despite these potential benefits, there is ongoing debate about the efficiency and effectiveness of government spending. Critics argue that misallocation of resources, corruption, and inefficiencies in public financial management often dilute the positive impacts of increased expenditure (Adewumi, 2024).
Moreover, the relationship between government spending and economic growth is complex. While public expenditure can stimulate demand and create a favorable environment for private sector expansion, excessive spending may lead to fiscal imbalances, inflation, and higher public debt, which in turn can hamper growth (Folarin, 2025). The challenge for policymakers, therefore, lies in calibrating spending levels to maximize developmental outcomes while maintaining fiscal discipline. This study will employ a mixed-methods approach, combining quantitative data analysis with qualitative policy reviews, to explore how variations in government spending affect economic growth in Nigeria. The findings are expected to offer insights into the efficacy of current spending strategies and provide recommendations for optimizing expenditure for sustainable growth.
Statement of the Problem
Despite the recognized importance of government spending as an engine for economic growth, its impact in Nigeria remains contentious. Although the government has significantly increased its expenditure in recent years to address developmental challenges, the anticipated acceleration in economic growth has not been uniformly observed (Olubunmi, 2023). One of the primary concerns is that inefficient allocation and management of public funds often result in suboptimal outcomes. Corruption, bureaucratic inefficiencies, and lack of accountability have undermined the effectiveness of government spending, leading to wasted resources and minimal positive spillovers into the broader economy (Adewumi, 2024).
Furthermore, the expansionary fiscal stance, while aimed at stimulating growth, has sometimes contributed to fiscal deficits and inflationary pressures. Such macroeconomic instability can negate the benefits of increased public expenditure, creating an environment of uncertainty that deters private investment and slows economic progress (Folarin, 2025). Additionally, the absence of robust monitoring and evaluation frameworks makes it challenging to determine whether spending is being used for productive purposes or is lost in administrative inefficiencies. This disconnect between spending levels and tangible economic outcomes has generated skepticism among both investors and policymakers regarding the true efficacy of government expenditure in driving growth.
Consequently, there is an urgent need to critically assess how government spending influences economic growth in Nigeria. This study aims to dissect the channels through which public expenditure affects growth, identify the inefficiencies that hinder its potential, and propose measures to enhance the productive impact of fiscal outlays. By addressing these issues, the research seeks to contribute to a more informed debate on fiscal policy and economic development in Nigeria.
Objectives of the Study
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To investigate the relationship between government spending and economic growth in Nigeria.
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To identify the key sectors where public expenditure has the most significant growth impact.
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To recommend strategies for optimizing government spending to maximize economic development.
Research Questions
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What is the effect of government spending on economic growth in Nigeria?
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Which sectors benefit most from public expenditure in terms of growth outcomes?
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How can government spending be optimized to support sustainable economic development?
Research Hypotheses
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H1: Increased government spending positively influences economic growth in Nigeria.
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H2: Targeted public expenditure in infrastructure and education significantly enhances growth.
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H3: Inefficiencies in public financial management reduce the positive impact of government spending on growth.
Scope and Limitations of the Study
This study focuses on government spending initiatives in Nigeria from 2023 to 2025 and their effects on economic growth. Data is gathered from national budgets, economic surveys, and policy reports. Limitations include potential data inaccuracies, the influence of external economic factors, and the challenge of quantifying qualitative impacts.
Definitions of Terms
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Government Spending: Public expenditure by the government on goods, services, and development projects.
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Economic Growth: An increase in a country’s production of goods and services, typically measured by GDP.
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Multiplier Effect: The proportional amount of increase in final income that results from an injection of spending.
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Public Financial Management: The set of systems and processes that govern the use of public funds.
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