The Impact of Government Expenditure on Economic Growth: Evidence from Nigeria

The main objective of this research is to analyse the impact of government expenditure on economic growth. Due to divergent views on the conclusions and suggestions, the results of recent scholarly research have created a significant gap in the literature that demands constant literature updates and further clarification on the impact of government expenditure and economic growth. Having observed the data characteristics, the Dynamic Ordinary Least Squares (DOLS) framework was used in the methodology. Nigeria's Gross Domestic Product (GDP) is the dependent variable, while capital expenditure, recurrent expenditure, inflation rate, industrial output, and investment are the independent variables. The capital expenditure is significant but inversely related to economic growth with (-0.050737) coefficient value. The e-views output shows a contradiction with standard traditional economic theory, where an increase in capital expenditure increases economic growth. The model shows a positive relationship between recurrent expenditure and economic growth. This shows that such spending supports aggregate demand and productivity-induced activities. Industrial output shows a positive but insignificant relationship with a probability value of 0.1929. Similarly, the inflation rate and investment are both statistically insignificant with a probability value of 0.3069 and 0.3229, respectively. It was recommended that policymakers should adjust capital expenditure, including optimization of recurrent expenditure, promotion of industrial output, and adopt an inflation-targeting monetary policy framework.

Economic growth, capital expenditure, recurrent expenditure, inflation, investment

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