Nigerians Total Government Expenditure: It’s Relationship with Economic Growth (1980-2012)

Abstract

This paper investigates the relationship between Nigeria’s total expenditure and economic growth from 1980- 2012. This study makes a modest contribution to the debates by empirically analyzing the relationship between Nigeria total government expenditure and its contribution to economic growth, using time series data from 1980 to 2012, obtained from the Central Bank of Nigeria Annual Report and Statement of Account and Federal Office of Statistics. It employs the Engle-Granger two step modeling (EGM) procedure to co-integration based on unrestricted Error Correction Model and Pair wise Granger Causality tests. From the analysis, our findings indicate that GDP and total government expenditure are cointegrated in this study. The speed of adjustment to equilibrium is 44% within a year when the variables wander away from their equilibrium values. Based on the result of granger causality, the paper concludes that a very weak causality exist between the two variables used in this study. Therefore, the policy implication of these findings is that any reduction in total government expenditure would have a negative repercussion on economic growth in Nigeria.

DOI: 10.5901/mjss.2014.v5n17p67