Government Capital Expenditure and Economic Growth in Nigeria: Any Lesson from Disaggregated Functional Analysis?

Abstract

This study investigates the influence of disaggregated functional government capital expenditure on economic growth in Nigeria between the periods of 1970 to 2013, using error correction technique of estimation on the data of the economy. The results indicated that the long run relationship exists between the components of public capital expenditure and economic growth. However, the results revealed that disaggregated functional capital expenditure of government did not generate the intending growth to real economic activities. More specifically, capital expenditure on economic service was actually negatively affecting the growth of the economy, though insignificant, implying that the economy did not benefit from such spending. This development in Nigerian economy contravenes the growth theories. We therefore recommend that Nigerian government should adequately monitor all her spending in the economy to achieve the purposes for which the funds are released. Again, all the government projects and allocations should be well supervised to reduce the costs inflated by government officials and contractors.

Keywords: Government, Expenditure, Error Correction, Economic Growth, Estimation