Impact of Public Expenditure on the Economic Growth of Nigeria: 1981-2016. A Disaggregated Analysis

Abstract

The study investigated the impact of public expenditure on the economic growth of Nigeria: A disaggregated analysis. Annual time series data were obtained from the Central Bank of Nigeria Statistical Bulletin for the period 1981 to 2016 on the variables used for the study. Unit root test was conducted using Augmented Dickey-Fuller test technique and the result showed that the variables were stationary though at different levels. Co-integrated test was also conducted using Johanssen co-integration test method and the result showed that the variables in the model are co-integrated meaning that the variables have a long run relationship. The error correction mechanism shows a very high coefficient of multiple determination (R²) in both the overparameterized model (99%) and the parsimonious model (99%). The short run regression result shows that all the components of public capital expenditure have a positive impact except public capital expenditure on administration and transfers that have a negative impact on the economic growth of Nigeria while all the components of public recurrent expenditure has a positive impact except public recurrent expenditure on economic services that has a negative impact on the economic growth of Nigeria.. The result from long run dynamic analysis also revealed that both components of capital and recurrent public expenditure have a positive and significant effect on the economic growth of Nigeria. Based on the, it was recommended that government should increase its capital and recurrent expenditure.

Keywords: Public expenditure, capital expenditure recurrent expenditure, economic growth

DOI: 10.7176/EJBM/11-18-02

Publication date:June 30^th 2019