Institutional Quality, Government Expenditure and Economic Growth Nexus in Nigeria

Abstract

Low economic growth often correlates with the escalation of poverty, deindustrialization, unemployment, a decline in living standards, inadequate investments in human capital, and heightened social and economic disparities. Therefore, comprehending the factors that contribute to economic growth is essential for steering an economy in the correct direction. The economic literature has identified institutional quality and government expenditure as factors that drive economic growth. This study specifically examines the impact of government expenditure and institutional quality on economic growth. The study employed the Dynamic Ordinary Least Squares (DOLS) method to analyse time series data from 1990 to 2022. The findings indicate that government spending has a substantial and favourable effect on economic growth. Furthermore, the findings demonstrated that the presence of institutions had a substantial and favourable impact on the economic development of Nigeria. According to these findings, the study suggests that government spending should be consistently increased, but this should be accompanied with fiscal discipline through the execution of the regulatory framework of the Nigerian government.