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Government Capital Expenditure and Economic Growth in Nigeria: Any Lesson from Disaggregated Functional Analysis?

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Abstract

This study investigates the influence of disaggregated functional government capital expenditure on economic growth in Nigeria between the periods of 1970 to 2013, using error correction technique of estimation on the data of the economy. The results indicated that the long run relationship exists between the components of public capital expenditure and economic growth. However, the results revealed that disaggregated functional capital expenditure of government did not generate the intending growth to real economic activities. More specifically, capital expenditure on economic service was actually negatively affecting the growth of the economy, though insignificant, implying that the economy did not benefit from such spending. This development in Nigerian economy contravenes the growth theories. We therefore recommend that Nigerian government should adequately monitor all her spending in the economy to achieve the purposes for which the funds are released. Again, all the government projects and allocations should be well supervised to reduce the costs inflated by government officials and contractors.

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... The research of Amuka et al., (2016) shows that in developing countries, the government uses the public sector to provide political support and people who are appointed through politics use resources to provide services to the community, then they divert them for personal use. Research supported also by Oyeleke et al., (2016) said in Nigeria, government capital expenditure does not have a significant impact on economic growth, because the economy is driven by services and each is responsive to private capital investment and government funds allocated for capital expenditure are not well used to produce intended effects on economic growth. ...
... There are also studies who established either negative or positive relationship between infrastructural expenditure and economic growth. Among these are Gafar and Saad (2009) who supports the long-run relationship between infrastructure and industrialisation, Enimola (2011), Onakoya, Salisu and Oseni (2012), Vidyarthi and Sharma (2014), Bakar and Mat (2017), Nedozi, Obasanmi and Ighata (2017) who showed that infrastructural investment has significant impact on growth, Abu and Abdullahi (2010) who observed that total capital expenditure, total recurrent expenditure and expenditure on education have a negative effect on growth, Oyeleke, Raheem and Falade (2016) who indicate that capital expenditure promotes growth and Akpokerere and Ighoroje (2013) who found the impact of total public spending on growth to be negative. For studies that found positive relationship between education and growth, it was argued that a well-educated and healthy labour force significantly influences economic growth both as a factor in the production function and through total factor productivity. ...
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