Cointegration of Public Sector Expenditure Patterns and Growth of Nigeria

Abstract

This study investigates the cointegration patterns of public expenditure and growth in Nigeria for the period 1961-2010. To achieve the objective of the study, data was collected from the Central Bank of Nigeria (CBN) Statistical Bulletin. The data collected from the secondary sources were analysed using relevant econometric models such as Augmented Dickey-Fuller, Diagnostic Tests, Johansen Co-integration and Vector Error Correction models. The results from the econometric analysis reveals that pattern of public expenditure of administration, social and community services, economic services, and transfers affects the economic growth of Nigeria. On the basis of the econometric result, the paper concluded that public expenditure is a very important instrument of fiscal policy that contributes to economic growth of any country. On the basis of the conclusion useful recommendations were provided that will improve the pattern and structure of public sector expenditure and management in Nigeria.

Keywords: Public expenditure, Growth, Cointegration, Vector error correction, ADF, Nigeria