IMPACT OF GOVERNMENT EXPENDITURES ON ECONOMIC GROWTH IN NIGERIA

CHAPTER ONE

1.0 Introduction

1.1 Background of study

The expenditures executed by the Federal Government play a critical role in the operation of all economies activities. It refers to expenses incurred by the government for the statutory maintenance and provision of public welfare, goods, services and works needed to foster or promote economic growth and improve the well being of its citizens in the society. Federal Government expenditures are majorly categorized into expenditures on administration, economic service, social service, transfers and others which have both capital and recurrent components. Government spending continues to be an important tool in the development process It is crucial to the operation of any economy at almost any level Today, most developing and developed countries use public spending to improve income distribution, direct resource allocationto desired areas, and influence the composition of national income (Assi, Dimson, Goodman & Andersen, 2019; Vtyurina, 2020; World Bank, 2008) In developing countries, for example, variations in government spending patterns are expected to not only ensure stability, but also to stimulate economic growth and expand employment opportunities (World Bank, 2015).

Economic growth refers to the increase in output of an economy’s capability to produce items and services needed to improve the welfare of the citizens of the country(Balami,2006).Growth is seen as a regular process which includes rising of output of items and services in the economy.Growth is significant when the rate of growth is plenty higher than population growth because it has to lead to improvement in human welfare. Therefore, growth is considered as a consistent process of growing the productive potential of the financial system and hence, of growing national earnings being characterised by way of higher charges of amplify of per capita output and total issue productivity, especially labour productivity (Balami,2006). Nigeria is a creating country that has skilled fluctuating financial growth quotes over the years. Government spending has been recognized as a key driver of economic growth, as it can stimulate demand for goods and services, create jobs, and improve infrastructure. No Nigeria has a history of high authorities spending, particularly in the areas of infrastructure development, education, and healthcare. However, the effectiveness of this spending in advertising economic increase has been a concern of debate among economists and policymakers. there is a want to recognize how authorities expenditure impacts distinctive sectors of the economy, as properly as the general macroeconomic environment. This perception is imperative for policymakers to make knowledgeable selections on how to allocate assets and prioritize spending to gain sustainable financial growth. the find out about if the affect of government expenditure on monetary boom in Nigeria is necessary for informing coverage decisions, enhancing fiscal management, and promotion inclusive and sustainable financial development in the country.

In Nigeria, government activities sometimes leads to misallocation of assets and prevent the growth of national output. Increasing the government expenditure may additionally result to reduction in the overall performance of the economy due to the reality that the authorities increases tax of men and women which leads to discount in productivity. Government in energy siphoned public fund and divert to unproductive projects. That is another way in which corruption can be seen in Nigeria, and due to the truth that they invest in unproductive projects, it involves little section of the authorities income generated from the standard public, and there will be nothing to show for it. This case study has raised a lookup question of how government expenditure impacts monetary growth in Nigeria and which of capital expenditure or recurrent expenditure stimulates growth in Nigeria. The goal of this study is to have an impact on analysis of Government expenditure on economic increase in Nigeria and also to study the path of causation between the macroeconomic variables. The research was guided by research hypothesis. The remainder of this research is divided as follows: area two gives the evaluation of relevant literature, section three offers the methodology, section 4 suggests the presentation of end result while section 5 gives the conclusion and recommendation.

1.2 Statement of problem

The Nigerian economy has changed over the past ten years, going from millions of naira to billions of naira and potentially reaching trillions of naira on the spending side of the budget (Aladejare, 2013). Nigerian government spending has increased over the years, but the country's deteriorating infrastructure continues to draw criticism from the populace. Given that Nigeria is one of the world's poorest countries, it appears that growing government spending has not resulted in appreciable economic growth and progress. Furthermore, a large number of Nigerians remain in extreme poverty; over 50% of them survive on less than $2 a day, and this is compounded by deteriorating infrastructure (particularly power and roads), which has caused numerous industries, such as those with significant jobless rates (Nurudeen & Usman, 2010). The Nigerian economy is now experiencing a recession, and some individuals are calling for higher government spending to put an end to the downturn and stimulate the economy. Government spending is thought to have the power to boost the economy and bring back economic expansion. Theoretical literature already in existence, such as Wagner's theory of government expenditure, Keynes' theory of public expenditure, and Musgrave-Rostow's theory, demonstrated that government expenditure increases economic growth; however, empirical findings in Nigeria appear to contradict this (Echekoba &Amakor, 2017). Nigeria is currently experiencing an economic downturn as a result of declining oil revenue, on which the country depends for survival.Due to falling oil revenue, Nigerias GDP is expected to rise by 5% in 2020, the highest rate since the fourth quarter of 2014. (Trading Economics, 2020). Understanding the sources of Nigeria's economic growth over the previous 40 years is essential for developing a strategy that would successfully accelerate the country's growth rate in the upcoming year. However, the Nigerian economy's GDP growth rate has not been consistent; rather, it has been less stagnant. Understanding the full range of factors that have contributed to Nigeria's economic growth over the previous forty years is essential to developing a plan that would increase the country's growth rate in the upcoming year. It is evident that government spending in Nigeria has been rising. It is against this assertion that the study sets to investigate the impact of government spending on Economic growth in Nigeria.

1.3 Objectives of study

The general objective of this study is to determine the impact of Government expenditure on the Economic growth in Nigeria. The specific objectives are to:

1. To Analyze the connection between government expenditure and economic growth.

2. To examine the long run relationship between the variables.

1.4 Research Questions...

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