Macroeconomic effects of government infrastructural expenditure on economic growth in Nigeria

Abstract

It is replete in the economic literature that government expenditure on infrastructure affects economic growth positively. But some empirical studies have found a contradictory result in many countries. This study, therefore, examines the macroeconomic effects of government infrastructural expenditure on economic growth in Nigeria from 1981-2021. The objectives of the study are to determine the macroeconomic effects of government expenditure on transport and communication system, education, health, and road and construction on economic growth in Nigeria. The study utilized annual time series data on real gross domestic product (RGDP) and selected explanatory variables which include: government expenditure on transportation and communication, government expenditure on education, government expenditure on health and government expenditure on road and construction. The study adopted the autoregressive distributed lag (ARDL) data analysis technique based on augmented Dickey-Fuller unit root test which indicates that the variables are integrated of I(0) and I(1). Findings reveal that, in the long run, while government expenditure on health, and road and construction have significant but negative and positive effects on real gross domestic product respectively, government expenditure on transportation and communication, and education have positive and insignificant effects on real gross domestic product in Nigeria. The short run findings produced mixed results with one striking revelation that previous value of RGDP (RGDP at lag 1) generates positive effect on RGDP. The study, therefore, concludes that government expenditure on infrastructure affects economic growth in Nigeria within the period under review, and recommends that rational allocation and effective management of public funds should be made on infrastructure with strict supervision of approved public projects.