Abstract

The objective of this study is to investigate the growth effect of government expenditure on economic growth in Nigeria over the period of 1980 to 2008, with a particular focus on sectoral expenditures. This paper investigates the growth effects of government expenditure in Nigeria over the period of 1980 to 2008, with a particular focus on sectoral expenditures. Five key sectors were chosen (security, health, education, transportation and communication and agriculture). Security as indicated by protection function of a nation consists of the creation of the rule of law and enforcement of property rights, life and property from external aggression health and education enhances the efficiency of labour which will increase the growth of national production. Also, expenditure on infrastructure such as transportation and communications enhances efficient production, by minimizing the cost of production. This will encourage more private investment, which increases the chance of firms to make more profit and hence fostering economic growth.  The variables were tested for stationarity and cointegration analysis was also carried out using the Johansen co-integration technique.  Error-correction test was also performed. The essence of the use of the techniques is to identify the interactions between government spending on these sectors (education, health national security, transportation and communication and agriculture) and economic growth in Nigeria. The result shows that in the short-run, expenditure on agriculture was found to be negatively related to economic growth. The impact of education, though also negative was not significant. The impact of expenditure on health was found to be positively related to economic growth. Though expenditures on national security transportation and communication were positively related to economic growth, the impacts were not statistically significant. It is possible that in the long-run, expenditure on education could be positive if brain drain could be checked.

Key words: Government expenditure, economic growth, error correction, sectoral spending co-integration, Nigeria.