Public Expenditures as a Fiscal Policy Tool for Sustainable Economic Growth: Its Quality Achievement and Employability in Nigeria

Abstract

Empirical framework on what makes up Quality Public Expenditure (QPE) has been missing. This paper attempted to bridge this gap by creating and developing an empirical-dimensional approach on QPE. This paper employed Vector Error correction model and broad based framework based on a growth-accounting approach, through causal examination between the productive and protective expenditures and the real Gross Domestic product in Nigeria for the sample period 1979-2012. Results show that productive and protective expenditures grow along with the real GDP with the protective expenditures consistently expanding over productive expenditures. Causality was found to run from Gross domestic product to both productive and protective expenditures in Nigeria. The implication is that public expenditure has not been determined based on their productiveness but passively as a fiscal policy instrument in Nigeria. It is strongly recommended that budgetary decisions should take account of the nature of expenditure with particular allocation of resources to identified productive areas. It is this framework that should drive the Federal government’s Medium Term Expenditure framework.

Keywords: Quality, Public Expenditure, Fiscal Policy, Economic Growth, Causality.