Effect of Government Expenditure and Value Added Tax on Economic Growth in Nigeria

Abstract

The study seeks to examine the relationship between government expenditure and VAT on economic growth of Nigeria. Both the exploratory and ex-post facto designs were adopted in this study. The study population consist of 28 years period given the number of years the data was collected. Using a consensus sampling method, the 28 years are used as sample size. The study used the ordinary least square regression technique, specifically the Vector Autoregressive model for testing the hypotheses stated. The first findings revealed that, government expenditure has a positive insignificant effect on gross domestic product of Nigeria While, the second hypotheses tested revealed that, value added tax has a positive significant effect on gross domestic product of Nigeria. As a result, it is recommended that, government expenditure has not translated to the needed improvement in gross domestic product of Nigeria. This might be as a result of misappropriation of funds and corruption or the political will to supervise expenditure on development items. It is recommended that government to set in place financial discipline measures that regulates payment for contracts and other expenditure such that these funds allocated for development to spur GDP will be utilized. The government should either maintain the current VAT rates or increase the VAT rates. But they should ensure that social amenities are made available to cushion the effect of VAT increase for revenue generation purposes.