The Applicability of Wagner’s Law to the Nigerian Expenditure Growth Profile between 1960-2014

Abstract

This empirical study of the growth of government total expenditure in Nigeria from 1960 to 2014 is to determine whether Wagner’s law of expanding state activity on the long run is applicable and extendable to other environmental contexts. The paper discusses the applicability of Wagner’s model and hypothesis to Nigeria. The study adopts the ordinary least squares (OLS) quantitative analysis to test the proposition. Results show that the growth of government expenditure in Nigeria was largely explained by the growth in debt servicing, per-capita GDP and inflation rate. The paper thus concludes that the stage of economic development consistent with ‘Wagner’s law’ is still potent in explaining the rise of government expenditure in Nigeria. Several recommendations were made which among others include increasing investments in the real sector and diversifying the economy to bring down the present high inflation rate and halt the current debilitating local currency devaluation.

Keywords: Law of expanding state activity, Government expenditure, public spending in Nigeria