Government Infrastructure Expenditure and Investment Drive in an Emerging Market Economy: Evidence from Nigeria

Abstract

Government infrastructure expenditure in an emerging market economy is critical for stimulating investment that will, in turn, foster economic growth. Given the recent growth in government infrastructure expenditure and the present deplorable state of infrastructure in Nigeria and in most emerging market economies, it becomes necessary to investigate whether the increasing government infrastructure expenditure actually drives both domestic investment and foreign direct investment (FDI). Thus, this study aimed at ascertaining whether government expenditure on roads infrastructure, transport infrastructure, defense infrastructure, and health-care infrastructure has significant positive relationship with the level of domestic investment and FDI in Nigeria. This study also employed econometric techniques in its investigation such as the unit root test, co-integration test, and error correction mechanism (ECM) in the estimation of the relevant relationships. The result of the co-integration test revealed that there exist long-run relationships between the variables in the models. The result of the short-run coefficients of the error correction estimates showed that government expenditure on road, transport, defense, and health infrastructure has positive relationship with domestic investment and FDI. However, this relationship was found to be insignificant. Thus, we conclude that government infrastructure expenditure is a good driver of investment in an economy.

Doğrudan Yabanci Yatirimlarin Çeki̇lmesi̇nde Ulaştirma Altyapisinin Etki̇si̇ni̇n İncelenmesi̇

“…As seen in Model 5, considering the coefficients of the variables, lnRTRANSPORT has the most significant positive effect (1,8030) on lnRFDI. It has been determined that, except for the trade openness, the findings obtained in the study were found to be in parallel with the literature (Tufaner and Şirin, 2021;Khadaroo and Seetanah, 2010;Wheeler and Mody, 1992;Loree and Guisinger, 1995;Mike and Oransay, 2015;Morisset, 2001;Azolibe et al, 2020;Asiedu, 2002;Pradhan et al, 2013;Bakar et al, 2012;Rehman et al, 2011;Ahmad et al, 2015). While the trade openness ratio is expected to affect the inward FDI positively, the findings do not match the literature.…”

“…The list of countries included in the study is given in the appendix, and since the relevant data of 8 other OECD member countries 3 could not be accessed, they could not be included in the model. In this study, besides total transportation infrastructure investment expenditures (rail, road, waterway, maritime port, airport), which is one of the explanatory variables used by the empirical literature, trade openness, inflation, and economic growth are included in the econometric model as explanatory variables (Asiedu, 2002;Khadaroo and Seetanah, 2010;Cheng and Kwan, 2000;Azolibe et al, 2020, Tufaner and Şirin, 2021, Özcan and Arı, 2010. The study's dependent variable was the ratio of foreign direct investments to GDP.…”

“…Mike and Oransay (2015) concluded that the relationship between infrastructure investments and FDI is positive in their study for the years 1975-2013 using time series methods. Azolibe et al (2020), in their study, showed that there is a long-term relationship between the variables in the Eyüp ATİOĞLU, Osman Nuri ŞAHİN Hitit Journal of Social Sciences, Year 15, Issue 1, 2022 88 model, which is designed as variables, including many infrastructure investments, as well as government expenditures for transportation infrastructure and inward FDI in Nigeria. Pradhan et al (2013) studied the long-term relationship between transportation infrastructure, FDI, and economic growth in India.…”

Does public capital expenditure reduce energy poverty? Evidence from Nigeria

“…First, to our knowledge, this inquiry is the first in Nigeria to explore the effects of PCE on EP. The positioning of the study also differs considerably from a strand of public expenditure literature in Nigeria which have majorly concentrated on inter alia: public expenditure and quality of life (Jeff-Anyeneh et al , 2020; Adegboyo, 2020; Jideofor et al , 2021); public expenditure and economic growth (Onifade et al , 2020; Aluthge et al , 2021) and public expenditure and investments (Usman and Abdulsamad, 2017; Azolibe et al , 2020; Azolibe, 2021). Second, unlike the only other study in this field (Nguyen and Su, 2021a), which focused on 56 developing nations and employed four energy access indicators as EP proxies, this study looks at Nigeria with additional EP indicators.…”

Dynamic spatial effects of determinants of foreign direct investment: A case of the southern key economic region of Vietnam

“…Asongu, Akpan, and Isihak (2018) have confirmed that the available natural resources and institutional quality are insignificant for FDI inflows into Brazil, Russia, India, China, and South Africa countries. Azolibe, Okonkwo, and Adigwe (2020) find that the relationship between government spending on infrastructure and FDI is insignificant. Similarly, Vijayakumar, Sridharan, and Rao (2010) concluded that the impact of trade openness and economic stability (measured by inflation rate) is insignificant on FDI.…”