DETERMINANTS OF GOVERNMENT EXPENDITURE IN NIGERIA

Abstract

This study examines the determinants of government expenditure in Nigeria for the periods spanning
from 1981 to 2020. The data used were collected from the Statistical Bulletin of the Central Bank of
Nigeria and the World Development Indicators of the World Bank. The least-square, correlation,
and Granger causality estimation techniques were employed in the analysis of the data. The findings
from the study reveals that there is a strong positive correlation between government expenditure and
government revenue, economic growth, public debt servicing, and the population aged between 15 and
64, whereas a negative and strong correlation was observed in the case of the relationship between
government expenditure and urbanisation, population structures aged between 65 and above, and 0
to 14 years. The results of the Granger causality test show the absence of causality between
government expenditure and government revenue, and economic growth. On the other hand,
unidirectional causality between government expenditure and public debt servicing, urbanisation,
democracy, and the adult population aged between 65 and above was observed. Furthermore, the
least square results indicate that government revenue and economic growth positively and
significantly affect government expenditure, whereas the population aged between 0 -14 negatively
affects government expenditure. On the other hand, public debt servicing, democracy, urbanisation,
and the population aged between 14-64 and 65 and above do not have a statistically significant
effect on government expenditure. The study, therefore, recommends that policymakers should take
into consideration the level of economic growth, the total revenue and population structures in
designing their expenditure profile.