Relationship between Government Expenditure and Economic Growth in Nigeria: Autoregressive Distributed Lag (ARDL) Bound Testing Approach

Lukman Lawali; Abdullahi Yusuf

doi:10.59890/ijbmp.v3i4.58

Authors

Lukman Lawali Zamfara State University Talata Mafara
Abdullahi Yusuf Zamfara State University Talata Mafara

DOI:

https://doi.org/10.59890/ijbmp.v3i4.58

Keywords:

Government Expenditure, Economic Growth, ARDL, VAR, Nigeria

Abstract

This paper uses the Autoregressive Distributed Lag (ARDL) and Vector Autoregression (VAR) frameworks to examine the relationship between government spending and economic growth in Nigeria from January 2008 to December 2023. The analysis makes use of monthly data on real GDP, total expenditure, capital expenditure, and recurrent expenditure. According to empirical results, while recurrent and capital expenditures are statistically significant, their effects on GDP are negative. The total government expenditure has an insignificant impact on economic growth. The ARDL bounds testing procedure confirms that the variables do not exhibit long-run co-integration. Furthermore, impulse response and variance decomposition analyses show that government spending has limited and declining effects on economic performance. These findings indicate that, despite increased public spending, its effectiveness in driving economic growth in Nigeria remains low, owing to inefficiencies, corruption, and poor project execution. To ensure a more growth-oriented fiscal policy framework, the study recommends stronger fiscal discipline, improved public financial management, reprioritising expenditure, and increased transparency and accountability in public spending

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