Implementing the Millennium Development Goals (MDGs) demands effective public expenditure management that is imbued with transparency and accountability measures to achieve strategic outcomes. Undoubtedly, developing countries, although to varying degrees, continue to grapple with the mechanics of good governance, resource management, including effective revenue generation and efficient allocation of public funds. This paper represents part of a larger research agenda to assess how fiscal policy influence economic growth in Nigeria. The paper attempts to assess the effects of government expenditure on economic growth in Nigeria.
The essence of the study is to determine the components of government’s expenditure that enhances growth, and identify those that do not, and recommend that they should be reduced to the barest minimum. The paper is broadly consistent with literature and it opens new grounds by focusing on the long-run impact of fiscal policy. The analytical framework is based on econometric methodology encompassing, test for Stationarity, test for cointegration and the specification of an error correction model. The study found no significant relationship between most of the components of government expenditure and economic growth. The estimation results were mixed, in particular some of the variables were weakly significant. However, it provided important clues to the future direction of research.
