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

Abstract

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
budget.

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Published
2021-01-19
Section
Business Administration and Business Economics