FEDERAL AND STATE GOVERNMENTS’ SPENDING AND ECONOMIC GROWTH IN NIGERIA: IMPLICATION FOR A WAY OUT OF RECESSION


Yaru, M.A. (Ph.D.)

Department of Economics, University of Ilorin, Nigeria

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Abstract

Governments at all levels in Nigeria tend to increase their spending during rising oil revenue and economic prosperity. The reverse is the case when there is a shock in oil prices and revenues. Thus, it is difficult to decipher the effects of the expenditures by states and the federal government independently on Nigeria’s economic growth and conversely, on its recession. This study examines the relative impact of federal and state government expenditures on economic growth with the aim of drawing policy implication for a way out of economic recession. Autoregressive Distributive Lag (ARDL) Error Correction Modelling (ECM) approach was used for the study. The results of estimated models suggest that increase in state governments’ expenditures have a relatively greater impact on economic growth compared to rise in federal government’s expenditure of the same magnitude in the short-run. This implies that increase in state governments’ expenditures presents greater chance of taking the Nigerian economy out of recession than the federal government expenditure.

Keywords: Federal, States, Spending, Economic Growth, Recession, Nigeria

FEDERAL AND STATE GOVERNMENTS’ SPENDING AND ECONOMIC GROWTH...