Government Expenditure and Economic Growth: Evidence from the Nigeria Economy (1981 – 2016)

Main Article Content

Sarah Elechi Jeff-Anyeneh
Steve Nkem Ibenta

Abstract

The effect of government expenditure on economic growth in Nigeria for a period of thirty-six (36) years that is, from 1981 to 2016 was the focus of this study. This study was inspired by two leading controversial issues in theoretical literature and empirical studies regarding the effect of government expenditure on economic growth for emerging economies. First, within the theoretical claim, Keynesian school of thoughts assert the presence of positive linkage between government expenditure and economic growth and development, while neoclassical economists refute this assertion and posited a negative association between government expenditure and economic growth and development. Identifying the side of these two arguments that is akin to all economies remains a puzzle among scholars as validation of either theory across the globe is still in vain. Secondly, the direction of relationship/causality between government expenditure and economic growth and development over the years is still not clear, especially for developing countries. Specifically, this study ascertained the effect of government recurrent and capital expenditure on the growth rate of real gross domestic product. We applied the Autoregressive Distributive Lag (ARDL) Co-integration and Granger causality test using secondary data from the Central Bank of Nigeria. We found that Nigeria’s economic growth is independent/not affected by government recurrent and capital expenditure. We are of the opinion that the Federal Government through its appointed ministers in collaboration with the legislature review the composition of Federal Government of Nigeria total expenditure by ensuring that capital expenditure takes at least 50% of annual total expenditure. Measures such as reducing foreign training and bogus allowances for political office holders should be tailored towards reducing government consumption expenditures.

Keywords:
Economic growth, government expenditure.

Article Details

How to Cite
Jeff-Anyeneh, S. E., & Ibenta, S. (2019). Government Expenditure and Economic Growth: Evidence from the Nigeria Economy (1981 – 2016). Advances in Research, 19(4), 1-14. https://doi.org/10.9734/air/2019/v19i430128
Section
Original Research Article

References

Mohammadi T, Maleki B, Gashti HP. The effect of government expenditure composition on economic growth: Evidence on ECO countries. Economics and Finance Review. 2012;2(5):14– 21.

Iheanacho E. The contribution of government expenditure on economic growth of Nigeria disaggregated approach. International Journal of Economics Management Sciences. 2016;5(5):1-8.

Hamzah KSB. The association between government expenditure and economic growth in Malaysia. Doctoral dissertation, Ritsumeikan Asia Pacific University, Malaysia; 2011.

Nwakoby CIN, Okaro SC, Ananwude AC. Fiscal deficit and inflation in an oil rich exporting country: Evidence from Nigeria. Journal of Policy and Development Studies. 2016;10(3):140-155.

Lwanga MM, Mawejje J. Macroeconomic effects of budget deficits in Uganda: A VAR-VECM Approach. Economic Policy Research Centre, Research Series No. 117; 2014.
Available:http://www.eprc.or.ug

Okoro AS. Government spending and economic growth in Nigeria (1980-2011). Global Journal of Management and Business Research Economics and Commerce. 2013;13(5):21-29.

Kweka JP, Morrissey O. Government spending and economic growth in Tanzania, 1965-1996. Centre for Research in Economic Development and International Trade, University of Nottingham, Research Paper No: 00/6; 2000.

Alshahrani SA, Alsadiq AJ. Economic growth and government spending in Saudi Arabia: An empirical investigation. International Monetary Fund, IMF Working Paper No: WP/14/3; 2014.

Nworji ID, Okwu AT, Obiwuru TC, Nworji LO. Effects of public expenditure on economic growth in Nigeria: A disaggregated time series analysis. International Journal of Management Sciences and Business Research. 2012;1(7):1-15.

Dereje M. The impact of government expenditure on economic growth in Ethiopia: An empirical analysis using Johansen co-integration approach. Department of Economics, College of Business and Economics, Jimma University, Ethiopia; 2012.

Jiranyakul K. The relation between government expenditures and economic growth in Thailand. Munich Personal RePEc Archive, MPRA Paper No. 46070; 2007.
Available:https://mpra.ub.uni-muenchen.de/46070/

Onakoya AB, Somoye ROC. The impact of public capital expenditure and economic growth in Nigeria. Global Journal of Economics and Finance. 2013;2(1):1-11.

Udoka CO, Anyingang RA. The effect of public expenditure on the growth and development of Nigerian economy (1980-2012). International Review of Management and Business Research. 2015;4(3):823-833.

Essays UK. Review of theories on government expenditure economics essay; 2013.
Available:https://www.ukessays.com/essays/economics/review-of-theories-on-government-expenditure-economics-essay.php?cref=1

Neog P, Phukan K, Barthakur S. Third generation economics; 2014.
Available:http://3gecopks.blogspot.com.ng/2014/02/wiseman-peacock-hypotheses.html

Aggarwal R. Growth of public expenditure. Pacific Business Review International. 2017;9(9): 122-128.

Adigwe PK, Anyanwu FA, Udeh F. Dynamic effect of government expenditure on Nigeria economic growth: Long run propensity and short run adjustments. Journal of Scientific Research & Reports. 2016;11(5):1-19.

Muritala T, Abayomi T. Government expenditure and economic development: Empirical evidence from Nigeria. European Journal of Business and Management. 2011;3(9):18-28.

Carter J, Craigwell R, Lowe S. Government expenditure and economic growth in a small open economy: A disaggregated approach; 2013.

Nasiru I. Government expenditure and economic growth in Nigeria: Co-integration analysis and causality testing. Academic Research International. 2012;2(3):718- 823.

Abu N, Abdullahi U. Government expenditure and economic growth in Nigeria, 1970-2008: A disaggregated analysis. Business and Economics Journal. 2010;4:1-11.

Adamu J, Hajara B. Government expenditure and economic growth nexus: Empirical evidence from Nigeria (1970-2012). Journal of Economics and Finance. 2015;6(2):61-69.

Alexiou C. Government spending and economic growth: Econometric evidence from the South Eastern Europe. Journal of Economic and Social Research. 2009;11(1):1-16.

Ebong F, Ogwumike F, Udongwo U, Ayodele O. Impact of government expenditure on economic growth in Nigeria: A disaggregated analysis. Asian Journal of Economics and Empirical Research. 2016;3(1):113-121.

Nwaeze C, Njoku NR, Nwaeze OP. Impact of government expenditure on Nigeria’s economic growth (1992 – 2011). The Macrotheme Review. 2014;3(7):79-87.

Ebiringa OT, Charles-Anyaogu NB. Impact of government sectorial expenditure on the economic growth of Nigeria. International Journal Economic Research. 2012;3(6):82–92.

Asghar N, Azim P, Rehman HU. Impact of government spending in social sectors on economic growth: A case study of Pakistan. Journal of Business & Economics. 2011;3(2):214-234.

Agbonkhese AO, Asekome MO. Impact of public expenditure on the growth of Nigerian economy. European Scientific Journal. 2014;10(28):219-229.

Oni LB, Aninkan OO, Akinsanya TA. Joint effects of capital and recurrent expenditures in Nigeria’s economic growth. European Journal of Globalization and Development Research. 2014;9(1):530-543.

Ayinde K, Kuranga J, Lukman AF. Modelling Nigerian government expenditure, revenue and economic growth: Co-integration, error correction mechanism and combined estimators analysis approach. Asian Economic and Financial Review. 2015;5(6):858-867.

Mushtaq M, Nazir R, Bashir I, Ahmed S, Nadeem M. Panel co-integration analysis of government spending, exports, imports and economic growth. International Review of Research in Emerging Markets and the Global Economy. 2014;1(2):81-89.

Egbetunde T, Fasanya IO. Public expenditure and economic growth in Nigeria: Evidence from auto-regressive distributed lag specification. Zagreb International Review of Economics & Business. 2013;16(1):79-92.

Bojanic AN. The composition of government expenditures and economic growth in Bolivia. Latin America Journal of Economics. 2013;50(1):83–105.

Chamorro-Narvaez RA. The composition of government spending and economic growth in developing countries: The case of Latin America. Ontario International Development Agency International Journal of Sustainable Development. 2012;5(2):12-22.

Akpokerere OE, Ighoroje EJ. The effect of government expenditure on economic growth in Nigeria: A disaggregated analysis from 1977 to 2009. International Journal of Economic Development Research and Investment. 2013;4(1):76-82.

Al-Bataineh IM. The impact of government expenditures on economic growth in Jordan. Interdisciplinary Journal of Contemporary Research in Business. 2012;4(6):1320-1333.