Impact of Government Expenditure on Economic Growth in Nigeria: A Time Series Analysis of Capital and Recurrent Expenditures in Agriculture and Infrastructure Sectors

Abstract

This study investigates the impact of government expenditure on economic growth in Nigeria, focusing on capital and recurrent expenditures in the agriculture and infrastructure sectors. Using time series data from 1985 to 2023, the research employs the Fully Modified Ordinary Least Squares (FMOLS) method to analyse the relationships between Real Gross Domestic Product (RGDP) and four key expenditure components: Government Capital Agriculture Expenditure (GCAEX), Government Capital Infrastructure Expenditure (GCIEX), Government Recurrent Agriculture Expenditure (GRAEX), and Government Recurrent Infrastructure Expenditure (GRIEX). The findings reveal that GCIEX and GRIEX have a strong positive and statistically significant impact on economic growth, with coefficients of 57.98 and 139.16, respectively. GCAEX also shows a positive and significant effect, albeit with a smaller coefficient (67.72). In contrast, GRAEX, while positive, is statistically insignificant, suggesting inefficiencies in recurrent spending. The study underscores the importance of prioritizing capital investments in infrastructure and agriculture to drive sustainable economic growth. Policy recommendations include enhancing the efficiency of recurrent expenditures, increasing targeted investments in productive sectors, and improving governance to maximize the impact of public spending on economic development.