EXPENDITURE OF GOVERNMENT AND ITS RELATIVE IMPACT ON THE EXPANSION OF THE ECONOMY NIGERIA AS A CASE STUDY

Abstract

This study examined the expenditure of government and its relative impact on the expansion of the economy, using Nigeria as a case study. The study adopted ex-post facto research design which focused on investigating relationship between variables especially where relationship already exist and cannot be manipulated. The study began with a conduct of unit root test using the Augmented Dickey- Fuller technique to determine the stationarity properties of the data employed and the result showed that the variables were stationary at first differencing and integrated of order one. The Johansen co-integration test was used to determine the relationship between government expenditure and economic growth. The result showed presence of long run relationship between government expenditure and gross domestic product. The result also indicates that government recurrent expenditure has negative and insignificant effect on real gross domestic product while government capital expenditure had positive and significant impact on economic growth in Nigeria. Based on these findings, the study concluded that government capital expenditure has huge significant impact on economic growth in Nigeria and recommended among others that; government should make effort to ensure that both recurrent and capital expenditure are managed in a way they can transform the country’s growth through strict adherence of the budget principle. Capital projects like construction of dams, roads, and building of hospitals should be undertaken and properly monitored by separate government agency as they tend to promote economic growth.