Components of Government Spending and Economic Growth in Nigeria: An Error Correction Modelling

Abstract

This paper examined the linkage between the components of government spending and economic growth in Nigeria. In contrast to existing studies, this study examines the relationship between the components of government expenditure (that is, agriculture; education; health and transport and communication) and economic growth with data spanning from 1970 to 2010. The result of the study showed that expenditure on agriculture had a significant influence on economic growth while expenditure on education, health and transport and communication had insignificant influence on economic growth. Based on the findings, this study suggests the need for a reversal in declining budgetary allocation to the educational and health sector in order to provide the sectors with the needed revenue which is necessary in influencing aggregate output of the economy. In addition, this study recommends the need to redirect the excessive expenditures of government on its officials in both the house of senate and house of representative to these pivotal sectors that is capable of stimulating economic growth of the Nigerian economy. In addition, it is highly recommended that the government and relevant stake holders should ensure that funds which are meant for development of the aforementioned sectors should be properly managed. However, the foregoing can be achieved by increasing funds that are meant for anti-corruption in order to enhance economic growth and sustainable development in Nigeria.