Submit your papersSubmit Now
For Enquiries: [email protected]
IIARD LogoIIARD

Government Sectoral Expenditure and Economic Growth in Nigeria

Okolie Fidelis Oguguo., Ven. Prof. Onuora Joshua Kenechukwu and Nduokafor, Christian Ogochukwu

Abstract

This study examined government sectoral expenditure and economic growth in Nigeria. The study specifically focused on government expenditure on general administration, defense, internal security, education, and health effects on real gross domestic product. The study adopted the ex post facto research design and data were obtained from the Central Bank of Nigeria (CBN) Statistical Bulletin, spanning from 2000-2022. The unit root test using Augmented Dickey-Fuller (ADF) showed stationarity at 1(0), 1(1), and 1(2). The hypotheses were tested using the ARDL model. The results showed that government expenditure on general administration has a very small but highly significant positive effect on real GDP. Government expenditure on defense has an insignificant negative impact on real GDP. Government expenditure on internal security has an insignificant positive effect on real GDP. Government expenditure on education has a significant positive impact on real GDP. Government expenditure on health has an insignificant negative impact on real GDP. In summary, the findings across different sectors reveal varying impacts of government expenditure on economic growth. Based on these, the study recommends increase efficiency in general administration spending, the government should reassess and possibly reallocate funds from defense to other sectors that have a more direct and significant impact on GDP growth, such as education or infrastructure. The government should focus on internal security investments that specifically bolster economic activities. An increase education funding and investments should be made in both primary and higher education to ensure a well-educated workforce. Finally, reassess the allocation of health funds and strive to enhance the effectiveness of health expenditure to promote economic growth.

Keywords

General AdministrationDefenseInternal SecurityEducationHealthReal

References

Abada, F., & Manasseh, C. (2020). Government expenditure, savings, FDI and economic growth: an impact analysis. Journal of Investment and Management, 9(4), 92-99. Abdul Wahab, A. A. O., Kefeli, Z., & Hashim, N. (2018). Investigating the dynamic effect of healthcare expenditure and education expenditure on economic growth in organisation of Islamic countries (OIC). Published in: 8th Islamic Banking Accounting and Finance (iBAF), 25th - 26th October 2018, Adya Hotel, Langkawi, Malaysia (25 October 2018): pp. 1-26. Aboubacar, B., & Xu, D. (2017). The impact of health expenditure on the economic growth in Sub-Saharan Africa. Theoretical Economics Letters, 7(03), 615-622. Alam, F., Singh, H. P., & Singh, A. (2022). Economic Growth in Saudi Arabia through Sectoral Reallocation of Government Expenditures. SAGE Open, 12(4), 21582440221127158. Aluthge, C., Jibir, A., & Abdu, M. (2021). Impact of government expenditure on economic growth in Nigeria, 1970-2019. CBN Journal of Applied Statistics, 12(1), 139-174. Ando, S. (2009). The impact of defense expenditure on economic growth: Panel data analysis based on the Feder Model. International Journal of Economic Policy Studies, 4(1), 141-154. Auerbach, A. J., & Gorodnichenko, Y. (2012). Measuring the output responses to fiscal policy. American Economic Journal: Economic Policy, 4(2), 1-27. Babu, J., Kiprop, S., Kalio, A., and Gisore, N. (2014). External debt and economic growth in East Africa. African Journal of Business Management, 8(21), 1011-1018. Benoit, E. (1973). Defence and Economic Growth in Developing Countries. Boston: Lexington Books. Chang, T., Fang, W., Wen, L. F., & Liu, C. (2001). Defence spending, economic growth and temporal causality: evidence from Taiwan and mainland China, 1952-1995. Applied Economics, 33(10), 1289-1299. Dynan, K., & Sheiner, L. (2018). GDP as a measure of economic well-being (Vol. 43, No. 1, pp. 1-52). Hutchins Center Working Paper. Esmail, H. A. H. (2020). The Contribution of Education Expenditure in Saudi Universities to Achieve Economic Development. International Education Studies, 13(3), 90-99. Furceri, D., & Sousa, R. M. (2011). The impact of government spending on the private sector: Crowding?out versus crowding?in effects. Kyklos, 64(4), 516-533. Haseeb, M., Aznin Abu Bakar, N., Azam, M., Hassan, S., & Hariyatie Hartani, N. (2014). The macroeconomic impact of defense expenditure on economic growth of Pakistan: An econometric approach. Asian Social Science, 10(4), 203-213. Ifa, A., & Guetat, I. (2019). The short and long run causality relationship between public health spending and economic growth: Evidence from Tunisia and Morocco. Journal of Economic Development, 44(3). Islam, M. S., Alsaif, S. S., & Alsaif, T. (2022). Trade openness, government consumption, and economic growth nexus in Saudi Arabia: ARDL cointegration approach. Sage Open, 12(2), 21582440221096661. Jmaii, A., & Zaafouri, N. (2024). New insights into the impact of global security on economic growth: The case of Tunisia. International Journal of Social Economics, 51(1), 18-30. Jaramillo, L., & Cottarelli, M. C. (2012). Walking hand in hand: fiscal policy and growth in advanced economies (No. 12-137). International Monetary Fund Khanal, S. (2023). Expenditure on Human Capital and Economic Growth: Evidences form Nepal. Tribhuvan Journal, 2(1), 72-82. Khidmat, W. B., Wang, M., & Iqbal, F. (2018). Impact of defense spending on economic growth: Evidence from developing nations of Asia. Journal of Sustainable Development Studies, 11(2). Landau, D. (1996). Is one of the ‘peace dividends’ negative? Military expenditure and economic growth in the wealthy OECD countries. The Quarterly Review of Economics and Finance, 36(2), 183-195. Lipow, J., & Antinori, C. M. (1995). External security threats, defense expenditures, and the economic growth of less-developed countries. Journal of policy modeling, 17(6), 579- Mankiw, N. G. (2019). Macroeconomis. Worth Publishers. Mbah, S. A., Agu, O. C., & Aneke, C. E. (2021). Does Internal Security Expenditure Impact on Economic Growth in Nigeria?. Acta Universitatis Danubius. Œconomica, 17(2). Mordi, N. O. (2010). Macro-economic model of the Nigerian economy. Research Development, Central Bank of Nigeria, Central Business District Garki, Abuja. Mose, N. G. (2020). Government sectoral expenditure and economic growth. African Journal of Economics and Sustainable Development, 3(3), 32-42. Mushkin, S. J. (1962). Health as an investment. Journal of Political Economy, 70(5, Part 2), 129-157. Ngobeni, E., & Muchopa, C. L. (2022). The impact of government expenditure in agriculture and other selected variables on the value of agricultural production in South Africa (1983–2019): vector autoregressive approach. Economies, 10(9), 205. Nurudeen, A., & Usman, A. (2010). Government expenditure and economic growth in Nigeria, 1970-2008: A disaggregated analysis. Business and economics journal, 4(1), 1-11. Okafor, C. N., Ogbonna, K. S., & Okeke, C. I. (2017). Effect of government expenditure on human capital development in Nigeria. International Journal of Banking and Finance Research, 3(2), 1-14. Okere, P. A., Uzowuru, L. N., & Amako, J. C. (2019). Government expenditure and economic growth in Nigeria. International Journal of Economics and Financial Management, 4(2), 29-41. Oktavianty (2024). The importance of educational expenditure toward human resources quality and economic growth: An empirical approach. International Journal of Social Science Humanity & Management Research, 3(1), 22-28. Omar, A. B., Ali, A., Mouneer, S., Kouser, R., & Al-Faryan, M. A. S. (2022). Is stock market development sensitive to macroeconomic indicators? A fresh evidence using ARDL bounds testing approach. Plos one, 17(10), e0275708. Onabote, A. A., Ohwofasa, B. O., & Ogunjumo, R. A. (2023). Government sectoral spending and human development in Nigeria: Is there a link? Heliyon, 9(7), e17545. Onifade, S. T., Çevik, S., Erdo?an, S., Asongu, S., & Bekun, F. V. (2020). An empirical retrospect of the impacts of government expenditures on economic growth: new evidence from the Nigerian economy. Journal of Economic Structures, 9(1), 6. Ozili, P. K. (2024). Impact of Financial stability on economic growth in Nigeria. In Blockchain Applications for Smart Contract Technologies (pp. 177-187). IGI Global. Ozyilmaz, A., Bayraktar, Y., Isik, E., Toprak, M., Er, M. B., Besel, F., Aydin, S., Olgun, M. F., & Collins, S. (2022). The relationship between health expenditures and economic growth in EU countries: empirical evidence using panel fourier toda–yamamoto causality test and regression models. International Journal of Environmental Research and Public Health, 19(22), 15091. Park, J. K., & Meng, X. (2024). Crowding out or crowding in? Reevaluating the effect of government spending on private economic activities. International Review of Economics & Finance, 89, 102-117. Pasara, M. T., & Garidzirai, R. (2020). Causality effects among gross capital formation, unemployment and economic growth in South Africa. Economies, 8(2), 26. Pesaran, M. H., Shin, Y., & Smith, R. J. (2001). Bounds testing approaches to the analysis of level relationships. Journal of applied econometrics, 16(3), 289-326. Peterside, Z. B. (2014). The military and internal security in Nigeria: Challenges and prospects. Mediterranean Journal of Social Sciences, 5(27), 1301-1307. Qehaja, S. S., Qehaja, D., Arber, H. O. T. I., & Marovci, E. (2023). The relationship between government health expenditure and economic growth: Evidence from western Balkan countries. International Journal of Applied Economics, Finance and Accounting, 15(1), 10-20. Shahbaz, M., & Shabbir, M. S. (2012). Military spending and economic growth in Pakistan

More Articles from JOURNAL OF ACCOUNTING AND FINANCIAL MANAGEMENT

Cashflow Management and the Performance of Commercial Banks in Nigeria

Author: Jeffrey Ayas Iyakonbogha, Clement E. Ozele

The Nigerian Code of Corporate Governance and Financial Performance of Deposit Money Banks in Nigeria

Author: i, Eneaniofu Daniel Mmaduakonam, ii, Azolike Nkiru Nkechi, iii, Emeter Patrick Okechukwu, iv, Okwor Emmanuel Ejimnkonye