Are There Nexus Between Public Expenditures and Economic Growth in Nigeria? - A Re-Examination

Abstract

Nigeria has been witnessing, for some three decades now, a rising trend in the size of her public expenditures and questions been raised on whether this upsurge could be related to economic growth. This study deliberately sets to reexamine the nexus between public expenditures and public expenditures in Nigeria adopting the Error Correction Model (ECM) estimation technique and the Pairwise Granger Causality test with disaggregated yearly data between 1980 and 2016. The findings suggested that the capital spending of the government has an inverse relationship with economic growth and also significant influence on economic growth. The government recurrent spending has a direct relationship with economic growth but statistically insignificant effects on economic growth. There is no causal relationship, as suggests by the result of the Granger Causality test, between public capital expenditure and economic growth. While there is existence of unidirectional causalities where exchange rate caused economic growth; economic growth caused private foreign investment; and economic growth caused public recurrent expenditure. The recommendations suggest that governments should make more provision for capital expenditures in the budget and ensure implementations are being properly monitored to ensure that the funds are not diverted to other uses; while cost of governance should be moderated with a view of making less provision for recurrent expenditure.