Government Expenditure and Economic Performance in Nigeria from 1994 To 2023

Abstract

This study examined the effect of government expenditure on economic performance in Nigeria over the period 1994–2023, with the objective of determining whether recurrent and capital expenditures significantly influence economic growth. Anchored on Keynesian theory, the study conceptualized government expenditure as a key fiscal policy tool capable of stimulating aggregate demand and enhancing productive capacity, while economic performance was proxied by the gross domestic product growth rate. An ex post facto research design was adopted, relying on annual time-series data obtained from authoritative secondary sources, including publications of the Central Bank of Nigeria and the National Bureau of Statistics. Descriptive statistics were employed to examine the trends and distributional properties of the variables, while unit root tests were conducted to ensure stationarity and avoid spurious regression results. The Ordinary Least Squares (OLS) regression technique was used to estimate the relationship between government expenditure components and GDP growth rate, complemented by Pairwise Granger causality tests to assess the direction of causality among the variables. The empirical findings reveal that both recurrent expenditure and capital expenditure exert negative but statistically insignificant effects on GDP growth rate in Nigeria during the study period. This indicates that, contrary to Keynesian expectations, government spending has not functioned as an effective catalyst for economic growth, largely due to inefficiencies in expenditure composition, weak prioritization, and institutional constraints that undermine the productive use of public funds. The results further suggest that increases in government spending alone are insufficient to stimulate growth without corresponding improvements in governance quality and expenditure efficiency. The study concludes that the effectiveness of fiscal policy in Nigeria depends more on the quality, allocation, and management of government expenditure than on its magnitude. Consequently, the study recommends rationalizing recurrent expenditure toward productivity-enhancing services, strengthening expenditure control and accountability mechanisms, and improving the efficiency of capital spending through rigorous project appraisal, effective monitoring, and strategic alignment with growth-enhancing sectors. These measures are essential for ensuring that government expenditure translates into sustainable economic performance.