A Comparative Analysis Of Capital Expenditure On Infrastructure And Economic Growth In Nigeria And South Africa

R K Ayeni,Ireti Olamide Olasehinde

doi:10.14738/abr.83.7879

Abstract

Nigeria and South Africa are two dominating economies in Africa but defer in terms of infrastructural development. The question of whether this infrastructural difference culminate to the difference in economic growth in the two economies is central to this study. This paper therefore, examined the impact of capital expenditure on infrastructure and economic growth both in Nigeria and South Africa using time series data from 1980 to 2016. Autoregressive Distributed Lag (ARDL) Bound tests technique of cointegration was used to on country-specific model of aggregate expenditure, following the Keynesian theory. The result showed that there is a the long-run relationship among the variables used in Nigeria and South Africa. Capital expenditure on infrastructure has positive but insignificant impact on economic growth in Nigeria while it was positive and significant on the economic growth in South Africa. The insignificant impact of capital expenditure on infrastructure on economic growth compare with South Africa may be the major difference in the two economies. This is traceable to lack of accountability and corruption in Nigeria compared to the good governance that truncated corruption and mismanagement in the government circle in South Africa. Tax base has positive and significant impacts on the economic growth in these two countries, this was supported by the Pairwise Granger Causality in which TAX granger caused economic growth in both countries. The study recommends injection of sufficient fund into infrastructural development in Nigeria. AS tax contributed positively to economic growth in both economies, it is recommended that tax revenue realized should be judiciously spent by providing the necessary amenities to discourage evasion of tax.

Highlights

Infrastructure is an engine of economic growth which cannot be undermined in enhancing factors of production such as capital, labor and entrepreneur; and thereafter helps to increase returns on investment by reducing production cost and improving transition efficiency
The result emanating from this study revealed that while recurrent government expenditure had positive and non-significant impact on economic growth, capital expenditure had negative and non-significant impact on economic growth which emphasized the need for increase and encouragement of private sector investment
Prob. 0.00000 0.00000 0.00001 0.223114 0.294743 0.119523 0.383621 In Table 1, the results of the estimated mean value which is used to examine the nature of the data distribution, recorded the highest mean value of (36.940905) for Total Labor Force (TLF) in Nigeria while Population (POP) has the lowest mean value of 0.0012131

Summary

Introduction

Infrastructure is an engine of economic growth which cannot be undermined in enhancing factors of production such as capital, labor and entrepreneur; and thereafter helps to increase returns on investment by reducing production cost and improving transition efficiency. A Comparative Analysis Of Capital Expenditure On Infrastructure And Economic Growth In Nigeria And South Africa. The estimated Kurtosis values for CAPEX and FDI are greater than 3, implying the peakedness of the distribution while GDPGR, NX, TAX and TLF are less than 3, indicating the flatness of the normal distribution in South Africa.

Results

Conclusion