This seminar investigates the impact of government expenditure on economic growth in Nigeria from 1986 to 2023. Against a backdrop of expanding public budgets yet suboptimal macroeconomic outcomes, the study specifically examines the effects of government capital expenditure, recurrent expenditure, and the overarching measure of government effectiveness on the nation’s economic growth, proxied by the gross domestic product (GDP) growth rate. The study employs an ex-post facto design and uses secondary time-series data sourced from the Central Bank of Nigeria, the National Bureau of Statistics, and the World Bank. The ARDL model is adopted to estimate both the short-run dynamics and long-run relationships between the variables. The key findings reveal a nuanced relationship: Government capital expenditures exhibit a positive and statistically significant impact on economic growth in both the short and long run. Conversely, the government effectiveness index shows a significant but negative long-run relationship with growth, indicating inefficiencies in the allocation and management of public funds. Furthermore, recurrent expenditure has an insignificant effect on economic growth, which means that it does not meaningfully contribute to the expansion of productive capacity. The study concludes that the quality and composition of public spending are more critical for growth than its sheer volume. Therefore, the study recommends a strategic reorientation of fiscal policy toward prioritizing productive capital investments, implementing stringent measures to enhance spending efficiency and transparency, and instituting a firm cap on the growth of non-essential recurrent expenditure to foster sustainable economic growth in Nigeria.
Ogu et al. (Tue,) studied this question.