The viability of public expenditure in stimulating Economic growth in Nigeria (mediating on the role of public sector)

  • Olufemi Adegboyo Federal University Oye Ekiti
  • Oladipo N Olaniyan Federal University Oye-Ekiti
Keywords: Peacock and Wiseman, Public spending, economic growth, ARDL, Wagner’s law


This paper explores the relationship between public spending and economic growth in Nigeria between 1981 and 2019.  The study employs ARDL along with Granger causality test to determine the directional and dynamic relationship.  The results show that social and community recurrent expenditure, social and community services capital expenditure and administration recurrent expenditure simulates Nigeria Economic growth (GDPGR), while, economic service recurrent expenditure (ESRX), economic service capital expenditure (ESCX), transfer capital expenditure and transfer recurrent expenditure deters Nigeria economic growth (GDPGR). The findings
further reveal that there is unidirectional causality that runs from both administrative capital expenditure (ADCX) and administration recurrent expenditure (ADRX) to economic growth (GDPGR). The study recommends that government should increase her spending on both recurrent and capital expenditures on social and community as well as administrative recurrent expenditure to move towards achieving vision 2030, while it should reduce the budgetary allocation to capital and recurrent expenditure on transfer, administration capital expenditure, and also reduce borrowing to reduce debt services. Finally, the government should monitor the proper disbursement of the allocated fund, block all loopholes and ensure full implementation of the


Adegboyo Olufemi (2020). The Nexus between Taxation and Nigerian Economic Growth. Skyline

Business Journal 16(1), 55-67

Agbonkhese A. O and Asekome M.O (2014). Impact of public expenditure on the growth of

Nigerian economy. European Scientific Journal Vol. 10 No.28 219-229

Akpan, N. (2005). Government Expenditure and Economic Growth in Nigeria: A Disaggregated

Approach. CBN Economic and Financial Review” 43(1).

Bhatia, H.L. (2012). Public Finance 27th edition. Vikas Publishing House PVT, Limited. New


Bhatia H.L (2002). Public Finance, 25th Edition. Vikas Publishing House, PVT Ltd, India.
Bingxin, Yu, Fan, S, and Saurkar, A (2009). Does composition of government spending matter to
economic growth?” in Proceedings of the International Association of Agricultural
Economists Conference, Beijing, China,

Castles, F.G and Dowrick, S. (1990).Impact of government spending levels on medium term
economic growth in the OECD, 1960– 1985, Journal of Theoretical Policies, (20)1,

Chude N.P and Chude D.I (2013). Impact of government expenditure on economic growth in
Nigeria. International Journal of Business and Management Review Vol. 1 No.4 pp64-

Devarajan, D., Swaroop,V., and Hengful, Z.(1993). What the government buy?: The composition
of public spending and economic performance. World Bank working papers 1082.
Devarajan, S., Swaroop, V., Zou H., (1996). The consumption of Public Expenditure and
Economic Growth”. Journal of Monetary Economics, Vol. 37, pp.313-344.
Egbetunde T. and Fasanya I. (2013). Public Expenditure and Economic Growth in Nigeria:
Evidence from Auto-Regressive Distributed Lag Specification. Zagreb International
Review of Economics and Business, Vol. 16, No. 1, pp79-92

Fajingbesi, A. A., Odusola, A. F., (1999), “Public Expenditure and Growth”, A Paper Presented at
a Training Programme on Fiscal Policy Planning Management in Nigeria, Organized by
NCEMA, Ibadan, Oyo state, pp.137-179.

Idenyi O.S, Obinna N.J, Agbi P.E, Ogbonnaya O.T (2016). Analysis of government expenditure
and economic growth in Nigeria: Application of Co integration Methodology. Asian
Research Journal of Arts and social sciences 1(4): 1-17

Jhingan, M. L. (2004). Advance Economic Theory. Vrinda Publications Limited, Delhi.
Keynes JM (1936). The General Theory of Employment, Interest and Money, Vol. 7,Cambridge:


Komain, J. and Brahmasrene, T. (2007). “The relationship between government expenditures and
economic growth in Thailand”. Journal of Economics and Economic Education
Research, Vol. 8(1), 93-104.

Kweka, J.P. & Morrissey, O., 1996. Government Spending and Economic Growth in Tanzania.

(Credit Research Paper no. 00/6).

Landau, D. L., (1983). Government Expenditure and Economic Growth: A Cross Country Study,

Southern Economic Journal, (49) 783 – 792.

Loizides J. and Vamvoukas G. (2005). Government Expenditure and Economic Growth:
Evidence from Trivariate Causality Testing. Journal of Applied Economics, Vol. 8, No
1, pp 125-152.

Maku O.E (2014). Public expenditure and economic growth nexus in Nigeria: A time series
analysis. Public policy and Administration Research Vol.4 No. 7 97-109

Maku, O.E. (2009). “Does Government Spending Spur Economic Growth in Nigeria? Munich
Personal RePEc Archive. MPRA Paper no.

Niloy B, Emranul HM, Osborn DR (2003). Public expenditure and economic growth: a

disaggregated analysis for developing countries.

Nurudeen, A. and Usman, A. (2010). Government Expenditure and Economic Growth in Nigeria,
1970-2008: A Disaggregated Analysis. Business and Economics Journal, Vol. 4.

Nworji I.F, Okwu A.T, Obiwuru T.C, and Nworji L.O (2012). Effects of public expenditure on
economic growth in Nigeria: A disaggregated time series analysis. International
Journal of Management Sciences and Business Research, Vol.1 No.7 pp1-15

Odo SI, Igberi CO, Anoke CI. Public debt and public expenditure in Nigeria: A causality analysis.

Research Journal of Finance and Accounting.7 (10):27–38.

Ogiogio, G.O. (1995). Government expenditure and economic growth in Nigeria. Journal of

economic management,2(1)

Oke M.O (2013). Budget implementation and economic growth in Nigeria. Developing country

studies Vol.3No. 13 pp 1-7

Olugbenga, A. O. and Owoye, O. (2007): “Public Expenditure and Economic Growth: New

Evidence from OECD Countries.

Oyediran L.S, Sanni I, Adedoyin L, and Oyewole O.M (2016). Government expenditure and
economic growth nexus: evidence from Nigeria. Business and Management Research
Vol.5 No.4 56-61

Oyinlola M.A and Akinnibosun O. (2013). Public expenditure and economic growth nexus:
Further evidence from Nigeria. Journal of Economics and International Finance. Vol 5
(4) pp.146-154

Oyinlola O,(1993). Nigeria’s National Defence and Economic Development: An Impact Analysis.

Scandinavian Journal of Development Alternatives, 12(3).

Oziengbe, S. A. (2013). The relative impacts of federal capital and recurrent expenditures on
Nigeria’s economy (1980-2011). American Journal of Economics, 3(5), 210-221.
Peacock, A.T. & Wiseman, J. (1961): The growth of public expenditure in the United Kingdom,

Princeton university press, Princeton, N.J.

Peacock, A. and J. Wiseman (1979): "Approaches to the Analysis of Government Expenditures

Growth”. Public Finance Quarterly, 3-23.

Peacock, A. (Eds.): Classics in the theory of public finance. New York, Macmillan.
Robinson, M. O., Eravwoke K. E. & Ukavwe, A. (2014). Government expenditures and economic
growth: The Nigerian experience. Mediterranean Journal of Social Sciences, 5(10), 89-

Seymour. D and Oral, W (1997). The impact of Government Expenditure on Economic Growth in

the OECS; A Disaggregated approach, World Bank Research.

Usman A, Mobolaji H.I, Kilishi A.A, Yaru M.A, Yakubu T.A (2011). Public expenditure and
economic growth in Nigeria. Asian Economic and Financial review. 1(3), pp 104-113
Wagner, A., (1883), “Three Extracts on Public Finance”. Translated and reprinted in R.A.
Musgrave and A.T. Peacock (eds), Classics in the Theory of Public Finance, London:
Macmillan, 1958.
Business Administration and Business Economics