Analysis of Impact of Sectoral Government Expenditures on Economic Growth in Nigeria: Bound Test Co-integration Approach

Abstract

This study empirically investigated the impact of government expenditures on adjudged critical sectors on economic growth in Nigeria (1984-2013). With the purpose of determining to what extent the government expenditures on these sectors are contributing to the achievement of growth objective. The study employs quantitative analysis by the use of Auto-Regressive Distributed Lag model (Bound Test Co-integration Approach) to determine both short-run and long run impact of Government expenditures on economic growth with the aid of Econometric package E-View 7. The necessary residual tests were conducted and the analysis was found to be reliable. The  specific ARDL estimates of the analysis reveals that government expenditure on defence retards the economic growth  and government expenditure on agriculture promote the economic growth while government expenditure on education and transport/communication have no impact on economic growth in the long-run. In the short run, none of the government expenditure on these sectors contributes to the growth objective. The study concludes that the reason for the failure of public expenditures to achieve the fiscal objectives is not unconnected to the fact that the level of fiscal indiscipline in these sectors is outrageous to the extent that it serves as drag to the economic growth. Consequently, the study decries policy prescription that the Government expenditures on these sectors should be increased except in the education sector to meet the UNDP recommendation.  And, further recommends that fiscal indiscipline in whatever manner among the political office holders and government officials must be mitigated to the barest minimum by ensuring that the fund budgeted are actually spent on the right course. The government should avoid the proliferation of anti-graft agencies but strengthen the available ones (EFCC and ICPC) by necessary legislations to carry out their functions diligently without unnecessary political interference.

Keywords: Sectoral Government Expenditures, Economic growth, Auto-Regressive Distributed Lag (ARDL) Model.