The Nexus Between Government Expenditure and Economic Growth of a Developing Economy

The objective of this study was to re-estimate and re-examine the association between government expenditure and economic growth in Nigeria using annual data from 1980-2009. Granger causality test was employed to test for causal relationship between these variables. The findings were consistent with previous empirical findings. The empirical result showed existence of causal relationship between government expenditure and economic growth, with a unidirectional causality running from government expenditure to economic growth. It can be concluded that in the period of study, government expenditure in Nigeria, to some extent, caused economic growth in the country, but the actual relationship is a subject of further study. Therefore, there should be high degree of transparency and accountability on spending by government at various sector of the economy in order to prevent channeling of public to private account of government officials. Also, there is a need for reduction in hassle cost, sound fiscal policy, improvement of monetary policy, political and social stability, and technological development to enhance economic growth.