Public Expenditure and Economic Growth in Nigeria (A Granger Causality Approach) 1983-2012


Department of Management Technology, Federal University of Technology, Owerri, Imo State, Nigeria


This paper examines the impact of government expenditure on the Nigerian economy for the period 1983 - 2012. The government expenditure components used as the explanatory variables in the model are: expenditures on Health, Education, Defense, Agriculture and Transportation and Communication. The Gross Domestic Product (GDP) was used as a parameter for measuring economic growth. In order to establish the link between Government expenditure and economic growth in Nigeria, secondary data were collected from the Central Bank of Nigeria (CBN) statistical bulletin. The Augmented Dickey-Fuller (Stationarity) unit root test revealed that there is no unit root in the variables. The Johansen cointegration test result confirms that a long run relationship exists between the Gross Domestic Product (GDP) and government expenditure on Health, Education, Defense, Agriculture and Transportation and Communication. The pairwise granger causality test reveals that dual causalities exists between Government expenditure on health and the GDP, expenditure on education and GDP, expenditure on Agriculture and GDP and expenditure on Transport and Communication and GDP while the Gross Domestic Product causes Defense expenditure. This study concludes that a significant relationship exists between government expenditure and the Gross Domestic Product. It recommends strict monitoring of the expenditure on defense and the provision of modern equipments for the navy, the army and the air force as this would help in fighting the increasing rate of insurgency in the North. There is also need for the increased funding to these critical sectors of the economy in order to facilitate economic growth and the attainment of the millennium development goals.  


Abu, N. and Abdullahi, U. (2010). Government Expenditure and Economic Growth in Nigeria, 1970-2008: A Disaggregated Analysis. Business and Economics Journal. 2010: BEJ-4, 1-11
Adesoye, A. B., Maku, O. E. and Atanda, A. A. (2010). Dynamic Analysis of Government Spending and Economic Growth in Nigeria. Journal of Management and Society. 1 (2), 27-37
Adewara, S. O. and Oloni, E. F. (2012). Composition of Public Expenditure and Economic Growth in Nigeria. Journal of Emerging Trends in Economics and Management Sciences (JETEMS). 4 (3), 403-407
Akpan, N. I. (2005). Government Expenditure and Economic Growth in Nigeria: A Disaggregated Approach. CBN Economic and Financial Review. 4 (3) Anyafo, A. M. O. (1996). Public Finance in a Developing Economy: The Nigerian Case, Department of Banking and Finance, University of Nigeria, Enugu Campus, Enugu.
Anyanwu, J. C. (1993). Monetary Economics: Theory, Policy and Institutions, Onitsha: Hybrid Publishers.
Anyanwu, J. C. (1997). Nigerian Public Finance, Onitsha: Joanne Educational Publishers. Asterious, D. and Hall, S. (2007). Applied Econometrics: A Modern Approach, London: Palgrave Macmillan.
Bhartia, H. L. (2009). Public Finance, 13th ed. New Delhi: Vikas Publishing House PVT Ltd.
Bose, N., Haque, M. E. and Osborn, D. R. (2003). Public Expenditure and Economic Growth: A Disaggregated Analysis for Developing Countries. The Manchester School. 75 (5), 533-556
CBN (2010). Central Bank of Nigeria Statistical Bulletin, Abuja Nigeria.
Douglas, S. and Williams, O. (1997). The Impact of Government Expenditure on Economic Growth in the OECS; A Disaggregated Approach, World Bank Research, Oxford University Press.
Folster, S. and Henrekson, M. (2001). Growth Effects of Government Expenditure and Taxation in Rich Countries. European Economic Review. 45 (8), 1501-1520
Jhingan, M. L. (2004). Macro-Economic Theory, 11th ed. New Delhi: Vrinda Publications (P) Ltd.
Kumar, R. D. and Sharma, C. (2008). Government Expenditure and Economic Growth: Evidence from India. The ICFAI University Journal of Public Finance. 6 (3), 60-69
Lawal, A. W. and Abdolkadir, I. R. (2011). An Analysis of Government Spending on the Education Sector and Its Contribution to GDP of Nigeria. International Journal of Financial Economics and Econometrics. 3 (1), 163-170
Liu, Ch.-H., Hsu, C. and Younis, M. Z. (2008). The Association between Government Expenditure and Economic Growth: The Granger Causality Test of the US Data, 1974-2002. Journal of Public Budgeting, Accounting and Financial Management. 20 (4), 439-452
Mitchell, J. D. (2005). The Impact of Government Spending on Economic Growth. Backgrounder. 1831, 1-18
Musgrave, R. A. and Musgrave, P. B. (2004). Public Finance in Theory and Practice, 5th ed. New Delhi: Tata McGraw.
Nnamocha, P. N. (2002). Public Finance for a Developing Economy, Owerri: Bon Publishers. Nwaimo C. E. (2009). Applied Principles of Economics, Owerri, Imo State: Supreme Publishers, Okigwe Road. Nwosu, E. J. (2000). The Challenge of Poverty in Africa, Skill Mark Media Ltd, Owerri. Nzotta, S. M. (2004). Money, Banking and Finance: Theory and Practice, 2 nd ed, Owerri, Imo State: Hudson-Jude Nigeria Publishers. Ogiogio, G. O. (1995). Government Expenditure and Economic Growth in Nigeria. Journal of Economic Management. 2 (1) Osiegbu, P. I., Onuorah, A. C. and Nnamdi, I. (2010). Public Finance: Theories and Practices, Asaba: C.M. Global Company Ltd. Oyinlola, O. (1993). Nigeria’s National Defense and Economic Development: An Impact Analysis. Scandinavian Journal of Development Alternatives. 12 (3) Taiwo, M. and Abayomi, T. (2011). Government Expenditure and Economic Development: Empirical Evidence from Nigeria. European Journal of Business and Management. 3 (9), 18-28
World Bank (2010). Knowledge, Productivity and Innovation in Nigeria: Creating a New Economy, Washington D. C.: The World Bank.