International Review of Business, Trade, and Economics
Sectoral Government Expenditures and Economic Growth in Nigeria: Lessons for Developing Economies
Abstract
Boniface Umoh E
This study looked at the combined impact of governmental administration, economic services, and social service spending on GDP growth in Nigeria from 1981 and 2023, taking exchange and inflation into consideration. The study used annual time-series data and autoregressive econometric techniques. The model’s overall statistical significance (p < 0.01) indicates that the independent variables have a combined impact on GDP growth. Individual sector spending on public administration (p = 0.91), social services (p = 0.95), and economic services (p = 0.69) did not. The limited effectiveness of fiscal spending in the face of macroeconomic uncertainty is shown by the negative but statistically insignificant effects of inflation and exchange rate volatility (p = 0.17 and p = 0.92). Diagnostic tests were used to verify the model’s resilience. The Breusch-Pagan-Godfrey test revealed no heteroskedasticity (p = 0.11), however the Breusch- Godfrey LM test revealed a small autocorrelation (p = 0.05). The results were more credible because the variance inflation components did not exhibit multicollinearity. Complementary SWOT and PESTEL analyses uncovered internal weaknesses including fiscal inefficiencies and inconsistent policies, in addition to external risks like oil price shocks and market volatility. The research may not adequately reflect the institutional and policy implementation variables influencing economic development since it mostly relies on secondary data. The analysis concludes that the country has been unable to produce sustainable growth due to inefficiency and a weak institutional structure. It recommends that expenditures be tightly matched with sectors that boost productivity, executed by ethical companies, and publicly tracked.