IMPACT OF GOVERNMENT EXPENDITURE ON ECONOMIC GROWTH IN NIGERIA

Scholars have always been puzzled about government revenue and expenditure in Nigeria over the years especially given the fact that the most important macroeconomic objectives of every government which includes price stability, full employment, balance of payment equilibrium and sustainable economic growth are not being attained. The questions as to how the government disburses funds have raised concerns which are the purpose of this study. This research work empirically aims to analyse the impact of government expenditure on economic growth in Nigeria using secondary data spanning 1985 to 2018. This data was collected from World Bank databank as well as Central Bank Statistical Bulletin. The variables adopted in the course of this research include: Gross Domestic Product as the dependent variable, capital expenditure, recurrent expenditure, external debt and exchange rate. The research work makes use of the unit root test which tests for stationarity, cointegration test which tests for long run impacts, granger causality test which estimates the direction of causality between variables and error correction mechanism which measures short run impacts as well as the overall stability of the analysis. Following the estimation of the model, it was discovered that the variables were all stationary at first difference. The co-integration test indicated that there exists only one co-integrating equation, hence, this still means that there exist long run impacts between the variables. The results from the granger causality test revealed that a unidirectional relationship exists between capital expenditure and economic growth, and also recurrent expenditure and economic growth. Based on the results obtained from the tests carried out, we can therefore conclude that government expenditure plays a vital role in economic growth of the nation especially the developing nations like Nigeria. Therefore, for Nigeria to increase the proportion of revenue in order to spur expenditure significantly, there needs to be an expansion of productive activities in other sectors of the economy (other than the oil sector) in order to diversify the revenue base of the country.