Public Expenditure Pattern and Economic Performance: The Nigerian Analytical Evidence

Abstract

Thrust by the gains of counter-cyclical policy inseveral economies but the persistent economic realities in Nigeria, despite the policy;this study looked at how Nigeria's economic performance was affected by patterns in public spending. Econometric model and estimation procedures were employed to analyse the time series data obtained from Central Bank of Nigeria reports (1981-2022). The analytical procedures include: Descriptive statistics to ascertain the normality of the distribution, Unit root tests was conducted with Augmented Dickey Fuller and Phillips-Perron parameters to prove the Stationarity of variables as integrated at first difference; Johansen cointegration model was used to estimate the existence of long run equilibrium relationship between the public expenditure pattern (capital and recurrent) and real gross domestic product (RGDP). The study also employed Parsimonious Error Correction model (PECM) to estimate the drift manner of the real GDP from the long run equilibrium relationship due to change in public expenditure pattern and the speed rate at correctional adjustment. The results indicate the presence of long run equilibrium relationship between the public expenditure dimensions and real gross domestic product. It also revealed appropriate and significant error correction estimation with coefficient (-0.129380) indicating an adjustment speed of the real GDP at disequilibrium back to the relationship as 12.9%. Specifically, the hypothetical test result on capital expenditure and real GDP suggests positive effect but insignificant. Similarly, recurrent expenditure affected real GDP positively but insignificantly. Thefindings portray trend in the short run period and tends to justify the theoretical hypotheses. However, it is concluded that public expenditure pattern has positive but insignificant effect on economic performance in Nigeria. Therefore, it is recommended for policy action of government to implement fiscal expenditures that would achieve infrastructures that impact on the economy through multiplier effect and not invest in spending that only increase aggregate demands of economic units which may cause inflation that deplete economic performance.