Government expenditure in Nigeria: Determinants and trends

Abstract

This study empirically examines the pattern and drivers of government expenditure with specific reference to capital and recurrent expenditure in Nigeria. The study employs a public choice framework and the model is estimated with time-series data from 1974 to 2012, using the Johansen estimation technique. The results show that capital and recurrent expenditure are resilient to shocks in total government spending and, similarly, total government expenditure is found to be resilient to shocks in capital and recurrent spending. However, whereas total and capital expenditure tend to be resilient to shocks in government revenue, recurrent expenditure is found to be significantly affected by shocks in government revenue. The effects of governance show that recurrent expenditure is not affected by any elements of poor governance as much as are capital and overall expenditure. Increased per capita income was found to be in support of Wagner’s law, given the response of total and capital expenditure, but this law was refuted by the recurrent expenditure response.