INSTITUTIONAL FACTORS IN THE NEXUS BETWEEN PUBLIC EXPENDITURE AND ECONOMIC GROWTH IN NIGERIA

Abstract

Despite the substantial budget outlay by the Nigerian government on capital and recurrent expenditure to reverse the trend of infrastructural decay, the rate of growth in the economy has not been commensurate with the quantum incurred in these areas. Rather than enhancing the economic growth as expected, the contrary is the case. This study investigates the effect of the quality of institutions on the link between public expenditure and the economic growth of the country. Secondary data sourced from Central Bank of Nigeria Statistical Bulletin (2020) and International Country Risk Guide (2017) was used for this study. The autoregressive distributed lag (ARDL) was applied to achieve the objective of the study. The results showed no long-run relationship between the gross domestic product growth rate, the proxy for economic growth, and other variables. The F-statistics value of 0.893 of the bound testing is lower than both the lower and the upper critical values at the benchmark of 5% significance level. In addition, although institutional factors do not follow a definite pattern and rather than complementing the positive impact of government expenditure on the economic growth of the country, the institutional factors constitute themselves as a drag on the growth effect which may have happened due to weak institutions which abet corruption and political interferences that culminate in weakening the efficacies of increasing public expenditure It is therefore recommended that concerted efforts should be made by the relevant ministries, departments, and government agencies at improving the quality of institutional factors governing and characterizing economic growth and sustainable development in Nigeria.