Government Capital Expenditure and Economic Growth in Nigeria: 2000- 2024

Abstract

This paper discusses the long-run and short-run nexus among government capital expenditure and economic growth in Nigeria based on the aggregated annual time series data (2000-2024) using the Autoregressive Distributed Lag (ARDL) bounds testing procedure. Government capital spending is dissected into three general components: Infrastructure Capital Spending (ICE), Education Capital Spending (ECE), and Health Capital Spending (HCE). Real Gross Domestic Product (RGDP) is used as the dependent variable. Time series data are used. The ARDL bounds test establishes the presence of a long-run cointegrating relationship between the variables, with infrastructure capital spending having the highest positive impact on economic growth (0.35 elasticity), followed by education (0.21) and health (0.19) capital spending. The error correction mechanism indicates that about 62% of short-run disequilibrium is corrected every year, thereby reflecting good adjustment towards long-run equilibrium. All the test of diagnosis confirms econometric stability of the model and stability tests confirm consistency of the parameters over the sample period. Estimates are in strong empirical support of Keynesian theoretical model with the implication that government capital expenditures is determined to be an economic growth engine through its multiplier effects and by raising productivity and policy implications are in support of targeted infrastructure investment in a balanced sectoral strategy. The discovery shows that investment in infrastructure should be given top priority because of its highest elasticity to growth, adopting an even-handed approach of investment in all three areas to restore complementarities, and with long-term commitment by the policy to accomplish lasting advantages of growth.