Original Research Article

Pairwise Dynamics among Government Expenditure, Debt and Economic Growth in Nigeria

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

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

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

Received: 17 June 2022  I  Accepted: 21 July 2022  I  Published: 28 July 2022  I  Article ID: MRJBM22017
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 increased borrowing in the midst of dwindling economic progress with a huge spending paradox is the trust of this study. The study examined the nexus between economic growth, government expenditure, and debt in Nigeria. Can fiscal spending have a causal link with the nation’s progress path is the crux of this study? The study used data from 1981 to 2020 with VAR pairwise granger causality analysis. The finding showed 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 illustrated 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. The conclusion from the study is that debt informed the consistent deficit spending in the country. The policy recommendation is that government should assess its fiscal behaviour to reduce borrowing and prudent management of resources in the country.

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