Original Research Article

The Impact of Government Expenditures on Economic Growth in Nigeria using VAR Approach

Damilola Temitope Oke¹, Moses C. Ekperiware^1*, John A. Oyetade², Adeyinka Adewusi¹

¹Caleb University, Lagos State, Nigeria
²Lagos State University of Science and Technology, Ikorodu, Lagos State, Nigeria

Senior Research officer and Lecturer Nigeria.
Mob.: +2347031565256

*Corresponding Author's E-mail: moses.ekperiware@calebuniversity.edu.ng

Received: 05 June 2022  I  Accepted: 24 July 2022  I  Published: 29 July 2022  I  Article ID: MRJAAEF22010
Copyright © 2022 Author(s) retain the copyright of this article.
This article is published under the terms of the Creative Commons Attribution License 4.0.

Abstract

The study established the nexus between economic growth, government expenditure, and debt in Nigeria. The increased borrowing in the midst of dwindling economic progress with a huge spending paradox is the trust of this study. Can fiscal spending help place the nation on a progress path with government debt and its servicing in Nigeria? Finding answers motivates this study. The study used data from 1981 to 2020 with VAR pairwise granger causality analysis. The finding of the VAR test shows a substantial positive link between government capital and recurrent spending and public debt in the Nigerian economy. The Wald test result demonstrates that there is a unidirectional causal relationship between state debt in Nigeria and both capital and recurrent expenditures. This conclusion has the apparent inference that Nigerian government borrowing is caused by budget deficits, a circumstance that is well-known in Nigeria at both the federal and state levels. In order to ensure that our budgeting system achieves allocative efficiency and that borrowing to finance budget deficits must be done objectively and realistically, it becomes important to reassess the government budgeting process. This study therefore suggests that planning-programming-budgeting systems (PPBS) and zero-based budgeting (ZBB) be implemented in place of the incremental budgeting (IB) that is currently used at the federal and state levels of government, which is the current global practice, given that these budgeting approaches aim to increase competition for budgetary resources and thereby support the achievement of government fiscal policy goals in the economy.

Keywords: Allocative efficiency, Causality, Fiscal policy, Government capital expenditure, Government recurrent expenditure, Public debt, Zero based budgeting