Recurrent Expenditure and Economic Performance in Nigeria from 1994 to 2023

Abstract

This study examined the effect of recurrent government expenditure on economic performance in Nigeria over the period 1994–2023, with the objective of determining its implications for aggregate economic growth and industrial sector performance. Adopting an ex post facto research design, the study relied on annual time-series data obtained from the Central Bank of Nigeria and the National Bureau of Statistics. Recurrent expenditure was specified as the independent variable, while economic performance was proxied by real gross domestic product (real GDP) and industrial sector GDP. Descriptive statistics were employed to examine the trends and distributional properties of the variables, while unit root tests were conducted to establish their stationarity properties and avoid spurious regression results. Following confirmation that the variables were integrated of order one, the Ordinary Least Squares (OLS) regression technique was used to estimate the relationships between recurrent expenditure and the selected measures of economic performance. The empirical findings reveal that recurrent government expenditure has a positive and statistically significant effect on real GDP, indicating that increases in recurrent spending contribute meaningfully to aggregate economic growth through enhanced public service delivery, income flows, and aggregate demand stimulation. Conversely, recurrent expenditure was found to exert a negative and significant effect on industrial sector GDP, suggesting that the prevailing structure and composition of recurrent spending do not support industrial productivity and structural transformation. These results underscore the asymmetric growth effects of recurrent expenditure in Nigeria, where gains in aggregate output are not matched by improvements in industrial sector performance. The study concludes that while recurrent expenditure is growth-enhancing at the macroeconomic level, its consumption-oriented bias, inefficiencies, and weak complementarity with capital expenditure constrain its contribution to industrial development. Consequently, the study recommends improving the efficiency and productivity orientation of recurrent expenditure through performance-based budgeting, stronger expenditure controls, and prioritization of human capital development. In addition, it advocates a rebalancing of fiscal priorities to curb unproductive recurrent outlays and strengthen the alignment between recurrent and capital expenditure in support of industrial infrastructure and services, thereby fostering sustainable and inclusive economic growth in Nigeria.