The Effect of Government Expenditure on Economic Growth in Nigeria

Chapter One

1.1 Background of the Study
Government expenditure plays a vital role in stimulating economic activities. It involves spending by the government on goods and services such as education, infrastructure, health, and defense. According to Keynesian theory, an increase in public spending can boost demand and promote growth, especially in developing economies (Samuelson, 2019).

In Nigeria, government expenditure has grown steadily over the years. This increase is largely driven by efforts to provide infrastructure, improve education, and support social welfare programs. Moreover, as the population expands, the demand for public goods continues to rise. Consequently, the government allocates a large portion of the national budget to social and capital expenditures.

However, despite rising expenditure, Nigeria’s economic growth has been unstable. Poor project execution, corruption, and mismanagement of funds often reduce the effectiveness of public spending (Okonkwo, 2022). Furthermore, recurrent expenditure frequently outweighs capital investment, leading to limited development impact.

Researchers continue to debate whether government spending truly promotes economic growth in Nigeria. Some argue that it enhances productivity and supports private investment. Others contend that excessive spending, especially on non-productive sectors, creates inflation and public debt (Adamu, 2023). Therefore, it is essential to examine how government expenditure influences Nigeria’s economic performance.

1.2 Statement of the Problem
Although public spending has increased, Nigeria’s economy still faces issues such as unemployment, poverty, and infrastructure decay. Moreover, government expenditure does not always translate into tangible growth. The challenge lies in determining whether public funds are effectively utilized to achieve economic development.

1.3 Objectives of the Study
The main objective is to investigate the effect of government expenditure on Nigeria’s economic growth.
Specific objectives are to:

1. Analyze the trend of public expenditure in Nigeria.

2. Examine the relationship between government spending and GDP growth.

3. Evaluate how recurrent and capital expenditures affect economic performance.

1.4 Research Questions

1. What is the trend of government expenditure in Nigeria?

2. How does government spending influence GDP growth?

3. What is the impact of recurrent and capital expenditure on development?

1.5 Significance of the Study
This study will help policymakers allocate public funds more efficiently. Furthermore, it will contribute to the understanding of fiscal policy’s role in national development. In addition, the findings will serve as a reference for future research on public finance and economic management.

1.6 Scope of the Study
The research covers Nigeria from 2010 to 2024. It focuses on the relationship between government expenditure and GDP growth, with emphasis on both recurrent and capital components.

1.7 Definition of Terms

• Government Expenditure: The total amount spent by government on public goods and services.

• Recurrent Expenditure: Regular spending on salaries, maintenance, and administrative costs.

• Capital Expenditure: Investment in long-term assets such as roads, schools, and hospitals.