IMPACT OF FEDERAL GOVERNMENT EXPENDITURE AND ECONOMIC GROWTH IN NIGERIA (1981-2022)

Abstract

This study assessed the impact of federal government expenditure on economic growth in Nigeria from 1981-2022. The purpose of federal government expenditure is essentially to stimulate economic growth, however, the extent to which federal government expenditure engenders growth has continued to generate theoretical and empirical debate. Conceptual and theoretical literature on federal government expenditure and economic growth were critically reviewed. Empirical evidence on the relationship between the federal government and economic growth were also reviewed. the Federal Government recurrent expenditure on administration has a coefficient of β= -19.56759 and a p-value of 0.0917, the coefficients of Federal Government Capital Expenditure on Social and Community Services (FGCSCS) were determined to be β = 22.88605, with a corresponding p-value of 0.0430, the Federal Government Recurrent spending on social and community services has a coefficient of β=33.53082 and a p-value of 0.0034, that the coefficient for Federal Government Recurrent Expenditure on Economic Services (FGRES) is positive, with a p-value of 0.0857. The analytical tool adopted for this study is the Auto Regressive Distribution Lag model and error correction mechanism. Other econometric tests such as unit root and cointegration tests were carried out to determine stationarity of series and long run relationship between federal government and economic growth in Nigeria for the period under study. The bounds test of cointegration revealed the presence of a long run relationship among the variables, while the error correction mechanism indicated a speed of 33.83% convergence to long run equilibrium. The analysis revealed that federal government’s capital expenditures on administration, social and community services and economic services have a significant impact on economic growth. Thus, the study establishes that federal capital expenditures impact more on economic growth in Nigeria than recurrent spending during the period under study. It was therefore recommended that the Federal Government of Nigeria through the relevant authorities should allocate a larger portion of its budget to sectors that significantly stimulate and promote growth in productive sectors, thus accelerating the growth of the Nigerian economy.