IMPACT OF GOVERNMENT EXPENDITURE AND INFLATION ON ECONOMIC GROWTH IN NIGERIA

Abstract

This study seeks to evaluate the government expenditure and inflation on economic in Nigeria using time series data from 2002 to 2023. The objective of the study was to find out if government spending and inflation rate affect economic growth in Nigeria. To achieve these objectives, the time series data were subjected to unit root test to remove the possibility of spurious regression due to non-stationarity of data. A model was formulated and an Autoregressive Distributed Lag (ARDL) Cointegration Technique was used as method of analysis. The variables used in the study were further subjected to bound test and other econometric tests. The data were co-integrated at order 1(1) and order 1(0). The long run relationship of the underlying variables is detected through the F-statistic (Wald test). The ARDL regression results shows that there positive and significant influence of government expenditure on the economic growth in Nigeria measured with LGDP. This result is in conformity with the apriori expectation of positive implication of government expenditure on the economic growth. The study also revealed that inflation rate had positive and significant impact on the growth of the economy in Nigerian. The implication of the results is that the higher the inflation rate, the greater the growth in the economy. This result is not in conformity with the apriori expectation of negativity of high inflation rate to the economic growth. The study therefore recommends that the government being the largest spending agent in any economy, should spend more on infrastructure that will improve the nation economy.