Analysis of Government Expenditure and Economic Growth in Nigeria: Application of Co integration Methodology

Abstract

This study analyzed the long run relationship between government expenditure and economic growth in Nigeria from 1980 – 2015 using the Johansen co integration technique, Error correction mechanism and Pair wise Granger causality econometric tool of analysis. The results of the study indicate negative relationship among government capital expenditure, unemployment and economic growth. A positive correlation was found among government recurrent expenditure, inflation and economic growth. The results showed unidirectional causality running from GKEX to gross domestic product and bi directional causality from GREX to gross domestic product. The causality result also indicated a unidirectional causality running from unemployment to RLGDP and government capital expenditure to unemployment. The authors recommends that the Nigerian government should ensure the full implementation of her minimum wage law across states and private sectors of the economy to take full advantage of the impact of salaries and wages in the performance of the economy. Secondly, efforts should also be made to address all negative issues associated with full implementation of capital projects in the economy beginning with strengthening the procurement process, adequate oversight function by the legislative arm and prosecution of fraudulent officers involved in any form of corrupt practices.