ABSTRACT

The objective of this study is to analyze the impact of government expenditure on economic growth in Nigeria. Because of the complex link between governments spending and economic growth, both descriptive and econometric analyses are used in the study. The descriptive analysis of the study explores the relationship between government spending and economic growth in Nigeria over the period of the study.  The study also observes that from early 1970s, oil revenue became the major source of revenue earnings for the government, and government expenditure fluctuates in response to fluctuations in crude oil earnings.

Government expenditure and economic growth also fluctuate in line with the earnings from crude oil. The study uses econometric analysis to examine the impact of the various components of government expenditure (consumption expenditure, government investment, government investment on human capital) including other control variables like capital stock, labour force, and private investment from 1970 – 2010 using vector error correction (VEC) model of regression analysis. The results show that consumption expenditure depresses economic growth while government investment and private investment t stimulate economic growth. While the remaining three variables (government investment in human capital, capital stock and labour force exert insignificant impact on economic growth. The results show that the coefficients of GIt-1 and GIt-2 are 4.317 and 6.125, respectively and that of private investment (PIt-1 and Pit-2) are 5.224 and 4.219. The goodness of fit, indicated by adjusted R-Square is over 91 percent, while F-statistic is 22.86.  The study recommends that government investment spending should be judged based on social cost and benefit; that public investment should be made to enhance private investment activities; and that competent and qualified personnel should be attracted into the public service for effective and efficient execution of government development programmes.

TABLE OF CONTENTS

                                                                                                          Page

Title Page                                                                                                  i

Approval                                                                                                    iii

Certification                                                                                               iv

Dedication                                                                                                 v

Acknowledgement                                                                                   vi

Abstract                                                                                                     vii

Table of Contents                                                                                    viii

List of Tables                                                                                            ix

List of Figures                                                                                           ix

CHAPTER ONE

1. Background to the Study                                                               1
2. Statement of the Problem                                                              3
3. Research Questions                                                                      6
4. Statement of Research Objectives                                                        6
5. Significance of the Study                                                               7
6. Statement of Research Hypothesis                                             10
7. Scope and Limitations of the Study                                              11
8. Definition of Terms                                                                         13

CHAPTER two

2.0    Introduction                                                                                     18

1. Theories of Economic Growth                                                      19

2.1.1 Factors Determining Economic Growth                                       19

2.1.2 Patterns of Growth                                                                         29

1. The Nature and Constituents of Government Expenditure                 32
2. Public Expenditure Growth                                                            38
3. The Impact of Government Spending on Economic Growth     45

2.5.1 Government Spending and Economic Growth in Nigeria          54

2.5.2 Trends in Total Government         Expenditure and GDP in Nigeria  56

2.6    Structure of Government Expenditure                                         69

1. Functional Sectorial Classification                                                         76

2.8    Empirical Literature                                                                         83

2.9    Theoretical Framework                                                                            99

CHAPTER THREE

3.1    Research Design                                                                                105

3.2    Model Specification                                                                  105

3.3    Estimation Procedure                                                               107

3.4    Data Discussions                                                                      118

3.5    Sources of Data                                                                        120

CHAPTER FOUR

4.0    PRESENTATION OF RESULTS AND ANALYSIS

4.1    PRESENTATION OF RESULTS 

4.2    INTERPRETATION OF RESULTS       

4.3    TEST OF HYPOTHESIS

4.3.1 EXPLANATION

CHAPTER FIVE

DISCUSSION OF RESULTS       

5.0    INTRODUCTION                 

5.1    DISCUSSION OF RESULTS       

CHAPTER SIX

SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

6.0    INTRODUCTION        

6.1    SUMMARY OF MAJOR FINDINGS

6.2    CONCLUSIONS         

6.3    RECOMMENDATIONS       

6.4    AREA FOR FURTHER STUDIES         

REFERENCES 

APPENDICES   

LIST OF TABLES

2.5.1 EXPENDITURE AS A PERCENTAGE OF GDP     -        -        59

AND GDP ANNUAL GROWTH RATE

2.5.2 FEDERAL GOVERNMENT SOURCES OF   -        -        -        61

REVENUE (OIL AND NON-OIL REVENUE)

2.6.1 GOVERNMENT RECURRENT AND CAPITAL       -        -        71

EXPENDITURES AS PERCENTAGES OF TOTAL

2.6.2 GOVERNMENT RECURRENT AND CAPITAL       -        -        72

EXPENDITURES AS PERCENTAGE OF GDP

2.7.1 FUNCTIONAL DISTRIBUTION OF GOVERNMENT        -        -        77 EXPENDITURE

4.1    UNIT ROOT TEST      -        -        -        -        -        -        -       106

4.2    COINTEGRATION TEST     -        -        -        -        -        -       108

4.3    VECTOR ERROR CORRECTION MODEL (VECM),

USING NGDP AS A DEPENDENT VARIABLE                 -        -       109

LIST OF FIGURES

2.5.1 TREND IN NOMINAL GDP AND TOTAL        -        -        -        57

GOVERNMENT EXPENDITURE