Is Government Capital Expenditure Productive? Evidence from Nigerian Manufacturing Sector (1971-2012)

Abstract

This paper investigates the relationship between Nigeria’s capital expenditure and the growth of the manufacturing sector from 1971-2012. The ordinal least square method is used to show the relationship between capital expenditure and manufacturing output. Manufacturing Gross domestic product is taken as dependent variable while exchange rate, interest rate, political stability, recurrent expenditure, money supply, interest rate, index of energy consumption, credit to private sector, degree of openness and rate of growth of GDP as independent variables. All the variables used are integrated of order one except political stability which is a dummy variable. The results suggest that there is a positive relation between rate of growth of GDP, capital expenditure, money supply, openness of the economy, recurrent expenditure and manufacturing output in the country. In the light of the above, the papers recommends, among other things, government should increase the capital expenditure and reduce recurrent expenditure and also make sure that government funds are properly managed in a manner that it will raise the nation’s production capacity and accelerate economic growth.

DOI: 10.5901/jesr.2014.v4n5p143