PUBLIC EXPENDITURE AND ECONOMIC DEVELOPMENT IN NIGERIA – A TIME SERIAL STUDY (1980 – 2012)

Abstract

The literature on the impact of government expenditure on economic growth has mixed results in both country and cross-country studies. The increasing government expenditure in Nigeria over the years has agitated the minds of researchers as to the impact of these expenditures on economic growth.  In an attempt to investigate the effect of government expenditure on economic growth, we employed a disaggregated analysis. The results reveal that government total capital expenditure (TCAP), total recurrent expenditures (TREC), and government expenditure on education (EDU) have negative effect on economic growth. On the contrary, rising government expenditure on transport and communication (TRACO), and health (HEA) results to an increase in economic growth. The study therefore, recommends that Government should increase both capital and recurrent expenditure, including expenditures on education, as well as ensuring that funds meant for the development of these sectors are properly managed.  Moreover, the study insists that government should increase its investment in the development of transport and communication, as well as creating an enabling macroeconomic environment for business to strive. Furthermore, government should raise its expenditure in the development of the health sector since it would enhance labour productivity and economic growth. Finally, the study recommends that government should encourage and increase the funding of anti-corruption agencies in order to tackle the high level of corruption in our public offices and institutions.