Impact of Government Expenditure on Nigeria’s Gross Domestic Product

Abstract

This study examines the impact of government expenditure on Nigeria’s gross domestic product between 2000-2022. The explanatory variables considered for this study include; agricultural expenditure, transportation/ communication expenditure, health expenditure and educational expenditure. The dependent variable is Nigeria’s gross domestic product. The study uses aggregate time series data from secondary sources. The study employs different econometric tools such as Unit root test, Augmented Dickey Fuller Test (ADF) Test,Autoregressive Distributed Lag (ARDL) Approach and Error Correction Model (ECM).The findings of the study have confirmed that government expenditure on various sector influence Nigeria’s Gross Domestic Product and follow established economic theories. Both Co-efficient of Determination as well as the F-statistic have established a good fit and joint significance of the independent variables on the dependent variable.The ECM results indicate that at the 66.70% speed of adjustment per annum the errors of the model corrected each period (each year). In other words, the speed implies that in the long run, 66.70 can be corrected after a number of periods (years) determined as follows: 100/66.70 periods (approximately1year 6months). The study recommends that; agricultural subsector which has a huge potential to stimulate economic growth in Nigeria should be supported by increasing government expenditure to the sector,the extent of government expenditure on Transportation/Communications sector should be sustained based on its positive impact on national real income, there is need to improve on government expenditure on health as high productivity in the economy can only be guaranteed with quality health conditions of workers and lastly there is need to sustain and increase government expenditures on education found to contribute positively and significantly to GDP.