Government Capital Expenditure, Foreign Direct Investment, and Economic Growth Relationship in Nigeria

Abstract

The relationship among government capital expenditure, foreign direct investment (FDI), and economic growth in Nigeria has been examined by this study. It specifically investigated the impact of government capital expenditure, and FDI, on economic growth in the country during the period from 1980 to 2012. The analysis of the relationship was carried out by employing some econometric techniques which included Ordinary Least Square (OLS), cointegration and Granger causality to ascertain the causal relation between variables, as well as the extent to which one variable impacted on the other. Findings from the analysis revealed that the both of government capital expenditure and growth Granger caused each other, as a unidirectional causality was established between growth and FDI. However, a Granger no-causality relationship existed between government capital expenditure and FDI. It was further revealed that government capital expenditure had a significantly positive influence on economic growth. Thus, the study suggests that government should channel more of her expenditure on capital projects like power, energy, road, health, education, and commercial agriculture in order to boost growth, as well as attract more FDI into the country.

DOI: 10.5901/mjss.2015.v6n4s3p444