Disaggregated Public Expenditure Patterns and Private Investment Outcomes in Nigeria

Abstract

This study sought to find out the extent of relationship (if any) between the short- and long-term effects of the disaggregated component of government expenditure on private investments. Using the Auto Regressive Distributed Lag (ARDL) model, the study determined that components of both recurrent expenditure and capital expenditure are significant determinants of the relationships with private investment in the long run only. The results indicates that there is a significant crowding-in effect between components of government expenditure and private investments in Nigeria. This is consistent with the Keynesian school, particular for Nigeria’s economy which requires government to spend heavily in order to create the enabling environment for inflows of private investment while increasing aggregate demand and jobs. The study determined the optimal recurrent and capital expenditure models for the economy and also showed that lending rates inflation rates, exchange rates, and GDP growth rates, are significant determinants of private investments.

Keywords: ARDL, Capital Expenditure, Private Investment, Recurrent Expenditure

DOI: 10.7176/JESD/14-16-03

Publication date: October 2023