Empirical Analysis Of The Impact Of Government Expenditure On Economic Growth Of Nigeria

Filed in Current Projects, Economics Project Topic by on October 18, 2020

Empirical Analysis Of The Impact Of Government Expenditure On Economic Growth Of Nigeria

Abstract

The research empirically analysed the impact of government expenditures on the economic growth of Nigeria. Specifically, the study centred on the impact of government gross capital formation and government final consumption expenditure on the gross domestic product of Nigeria from 1996 to 2016.

Therefore, data on government gross capital formation and government final consumption expenditure was generated from the statistical bulletin of Central Bank of Nigeria (CBN) covering the stated time frame.

The generated data were analysed using multiple regression analysis and the result provided the findings that;

gross capital formation i.e government expenditure on capital projects has a negative and significant impact on the economic growth of Nigeria and government final consumption expenditure has a positive and significant effect on the economic growth of Nigeria.

based on the findings, the study recommended that; government annual expenditures on the capital project such as the provision of infrastructural facilities should be contracted since the increase in capital expenditure will not result in rapid and sustained economic growth;

and that government recurrent expenditure should be increased to ensure rapid economic growth, since an increase in recurrent expenditure results in rapid increase or improvement in the state of the economy.

Introduction

It is a proven fact that no society throughout history has ever attained a high level of economic growth without the contribution of the government. Where government do not exist anarchy reigned and little wealth was accumulated by productive economic activity.

After the government took hold of the rule of law and the establishment of private property right, its impact in the growth process of the country is heightened.

Underdeveloped nations are keen on rapid economic growth which requires huge expenditure to be incurred in the various sectors of the economy.

Over time, the relationship between government expenditure and economic growth has continued to generate a series of debate among scholars.

Government performs two notable functions: protection (providing security) and provisions of certain public goods and services.

Protection function consists of the creation of the rule of law and enforcement of property rights through the engagement of the services of security personnel.

This helps to minimize risks of criminality, protect life and property, and the nation from external aggression (Al-Bataineh, 2012).

Reference

Abu-Eideh, O. (2015). Causality Between Public Expenditure and GDP Growth in Palestine: An Econometric Analysis of Wagner’s Law. Journal of Economics and Sustainable Development, 6(2), 189-199.

Al-Bataineh, I. (2012). The Impact of Government Expenditures on Economic Growth in Jordan. Interdisciplinary Journal of Contemporary Research in Business, 4(6), 1320-1338.

Al-Ghalepi, K. (2011). Government Expenditure and Test the Law of Wagner in Iraq for the Period 1975-2010. Management and Economic Science, 8(25), 29-52.

Al-Mazrouei, Al., & Nejmeh, E. (2012). The Impact of Public Expenditure in Gross Domestic Product: An Empirical Study on the United Arab Emirates Through the Period (1990-2009). Damascus University Journal for Economic and Legal Science, 28(1), 611-650.

Al-Qaisi, K. (2012). The Impact of General Expenditures on Economic Changes in Jordan. Interdisciplinary Journal of Contemporary Research in Business, 4(5), 541-557.

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