Abstract
This study investigates the impact of government expenditure, savings, FDI on economic growth in Nigeria for 1995 to 2018. The data for the study was sourced from World Bank’s World Development Indicator, while OLS estimating technique was employed for the analysis. Using OLS estimator, the empirical evidence from the findings show that government expenditure, savings, FDI significantly impacted economic growth. Therefore, government expenditure, savings, foreign direct investments are key determinants of economic growth in Nigeria. Based on the findings, we suggest that the Nigerian government should reduce the personal income tax so as to promote the disposal income and invariables savings. Also, effort should be made to promote stable and less volatile macroeconomic environment for the attraction of foreign direct investment inflow into Nigeria. This in turn could boost employment and increase in income and the individual savings. Further, we found government expenditure to negatively relate to economic growth. Hence, government spending in itself is not bad but should be utililize efficiently to help drive economic growth. Hence, we suggest that government spending should be reduced since it does not contribute immensely to the growth of the economy.
Highlights
Government spending constitutes the key components in public finance which is vital to economic growth and development
real gross domestic product (RGDP) and government expenditure (GEXP) was found to be integrated at order I(1) for both Augmented Dickey-Fuller (ADF) and PP test and SAV, foreign direct investment (FDI), INV, RINT and real exchange rate (REXR) was found to be integrated of order I(0) for both test
In order to ascertain the impact of government expenditure, savings, foreign direct investment, on economic growth in Nigeria, the explanatory variables were regress on the dependent variables using ordinary least squares (OLS) method
Summary
Government spending constitutes the key components in public finance which is vital to economic growth and development. Keynesargued that government expenditures promote increase in aggregate demand, increase in national income and economic growth through its multiplier effects in areas such as healthcare, education and agriculture sector among others Growth in these sectors promotes economic growth, and enhances productivity through the attraction of the needed foreign direct investment with enhance job creation and improved per-capita income [34]. Regrettable, despite the rising profile of spending by governments across times, and policy mix initiated to encourage FDI inflow and to promote savings, developing countries have been bedeviled by successive years of dilapidated infrastructural facilities, occasioned by poor policy pronouncement [31, 37, 50, 34, 29]. Understanding the impact of government spending, savings, foreign direct investment inflow on economic growth is crucial for informed economic decisions
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