Government Spending and Economic Growth in Nigeria: Evidence from Disaggregated Analysis

The uncorrelated level of economic prosperity with the vast amount of budgetary allocations in terms of expenditure in Nigeria has raised major concerns and occupies the centre of literature debate over time. The dilapidated state of social and human capital in the economy despite its large foreign earnings and expended periodic expenditure over the last three decades has accentuated the need for a theoretical and empirical explanation for the retrogressive advancement of the Nigerian economy. Based on this, the study attempts to investigate the impact of both government recurrent and capital expenditure on growth performance using an econometric analysis based on Johansen technique for the period of 1970-2009. The study found the component of total expenditure impacting negatively (except education and health) and insignificantly on growth rate; further diagnosis test reveals capital expenditure may likely induce significant impact on growth rate in the long-run. Notable recommendations include, proper management of capital and recurrent expenditure, proper surveillance and quantification of capital spending in order to boost social and human capital, and development of sound institutions void of political influences.

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