impact of government expenditure on economic growth in nigeria
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ABSTRACT
The objective of this study is to analyze the impact of government expenditure on economic growth in Nigeria. Because of the complex link between governments spending and economic growth, both descriptive and econometric analyses are used in the study. The descriptive analysis of the study explores the relationship between government spending and economic growth in Nigeria over the period of the study. The study also observes that from early 1970s, oil revenue became the major source of revenue earnings for the government, and government expenditure fluctuates in response to fluctuations in crude oil earnings.
Government expenditure and economic growth also fluctuate in line with the earnings from crude oil. The study uses econometric analysis to examine the impact of the various components of government expenditure (consumption expenditure, government investment, government investment on human capital) including other control variables like capital stock, labour force, and private investment from 1970 – 2010 using vector error correction (VEC) model of regression analysis. The results show that consumption expenditure depresses economic growth while government investment and private investment t stimulate economic growth. While the remaining three variables (government investment in human capital, capital stock and labour force exert insignificant impact on economic growth. The results show that the coefficients of GIt-1 and GIt-2 are 4.317 and 6.125, respectively and that of private investment (PIt-1 and Pit-2) are 5.224 and 4.219. The goodness of fit, indicated by adjusted R-Square is over 91 percent, while F-statistic is 22.86. The study recommends that government investment spending should be judged based on social cost and benefit; that public investment should be made to enhance private investment activities; and that competent and qualified personnel should be attracted into the public service for effective and efficient execution of government development programmes.
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