Remigius Chinwoke Ejinkonye (PhD)
Department of Banking and Finance, College of Management Sciences,
Evangel University, Akaeze, Ebonyi State.
E-mail: rejinkonye@evangeluniversity.edu.ng
(Corresponding author)
&
Edith Nkiruka Mazeli (PhD)
Department of Banking and Finance, Faculty of Management Sciences,
Chukwuemeka Odumegwu Ojukwu University, Igbariam, Anambra State.
E-mail: edithmazeli@yahoo.com
&
Zakari Muhammed Uloghobui (MSc)
Department of Banking and Finance, School of Financial Studies,
Auchi Polytechnic, Auchi, Edo State.
E-mail: zakarimuhammed2001@yahoo.com
ABSTRACT
The study examined the nexus between government capital expenditure and economic growth in
Nigeria for the period 1981 to 2021. Nigerian economy is facing challenges of dwindling revenue
from crude oil on which the country highly rely for sustenance and inadequate diversification of
the productive sectors of the economy. This economic downturn is adversely affecting funding of
projects hence there is reliance on borrowing to help finance her infrastructural needs. This could
be why the desired economic growth is not being observed. The dependent variable was gross
domestic product, while independent variables were administration, social & community services,
economic services and transfers capital expenditures. The specific objectives were to determine
the relationship of: administration capital expenditure (ADCAEXP) and gross domestic product;
social & community services capital expenditure (SCSCAEXP) and gross domestic product;
economic services capital expenditure (ESCAEXP) and gross domestic product and transfers
capital expenditure (TRCAEXP) and gross domestic product. The model used was GDPt = b0+b1
ADCAEXPt+b2 SCSCAEXPt+b3 ESCAEXPt+b4 TRCAEXP + et. The research design was ex-postfacto, data sourced from the CBN statistical bulletin and analyzed using ordinary least square
regression. The hypotheses were tested at 5% level of significance using Eviews10 software. The
findings showed that administration capital expenditure had positive and significant effect (prob.
- 0.0114) on gross domestic product; social & community services capital expenditure had
negative and non-significant effect (prob. – 0.8073) on gross domestic product; economic services
capital expenditure had negative and non-significant effect (prob. – 0.2325) on gross domestic
product; transfers capital expenditure had a positive and significant effect (prob. 0.0028) on gross
domestic product. Also, the R-squared value was 0.8957. The probability f-statistic value showed
0.000000, which implied that the independent variables are jointly significant to gross domestic
product in Nigeria for the period reviewed. The researchers hence recommended among others
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that: (1) The Nigerian government should ensure proper channeling of her social & community
services capital expenditures to the relevant sub-sectors so as to trigger production of goods and
services hence stimulating economic growth. (2) The Nigerian government should ensure that her
capital expenditure on economic services should be properly channeled and monitored to help
achieve economic growth in Nigeria. (3) Capital expenditures therefore need to be properly
monitored, evaluated before approval to avoid fraud, misappropriation and wastages.
Introduction:
Government expenditure comprises all government consumption and investment (Barro &
Grilli as cited in Oyediran, Sanni, Adedoyin & Oyewole., 2016, p. 2). It can also be referred to as
government spending in the various sectors of the economy. This spending is broadly classified
into capital expenditure and recurrent expenditure. Government capital expenditure are payments
for acquisition of fixed capital assets, stock, land or intangible assets. In other words, capital
expenditure are government spending on capital projects or activities that will lead to future
generation or production of goods and services in the economy. Government capital expenditures
are divided into four sectors namely: general administration, social & community services,
economic services and transfers. Such expenditures are meant to be carried out over some years
depending on how big the government project is. Kimberly (as cited in Odubuasi, Ifurueze, &
Ezeabasili, 2020, p. 4) defined economic growth is an increase in the productive capacity of a state
in terms of production of goods and services over a specific period of time.
Government expenditure stimulates aggregate demand and causes some real gross
domestic product (GDP) growth. This leads to job creation and more workers earns more income.
The new income hence spurs consumer spending which drives aggregate demand upwards and
causes additional real GDP growth.
The general view is that public expenditure either recurrent or capital expenditure, notably
on social and economic infrastructure can be growth-enhancing. Nevertheless, financing of such
expenditure if not properly managed can retard growth. Understanding the linkages between
government expenditure and economic growth has raised huge debates theoretically and
empirically. It is therefore necessary for governments to review the relationship of her expenditure
and economic growth. This is crucial because it is a common belief that the government plays a
significant role in the development of a country. Increase in government expenditure may result in
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the growth of the economy by increasing the national income, especially when it is injected in
development programs.
Nigerian government capital expenditure have been on the rise due to the increased demand
for public goods (utilities) like roads, communication facilities, power, education and health. In
addition, there is increasing need to provide both internal and external security for the people and
the nation. Unfortunately, this rising expenditure has not translated into meaningful growth and
development, as Nigeria ranks among the poor countries in the world. It is therefore seen as a
paradox that despite the rising levels of government expenditure, which in most cases are financed
through local and international debts, many Nigerians are yet to feel the real effect of this rising
expenditure.
Most of the previous studies on the subject area have focused on examining the impact of
total government expenditure or capital and recurrent expenditures on economic growth. This
study however, assessed the growth nexus of components of government capital expenditure on
gross domestic product of Nigeria. It is however worthy to note that some government expenditure
are based on political consideration instead of on concise economic considerations. Olukoye (as
cited in Oyediran et al., 2016, p. 1) further stated that public expenditure which can be recurrent
or capital have the capability to enhance the nation’s economic growth in as much as it is expended
on socio-economic facilities. Oyediran et al (2016) further added that the determinant of how
effective government expenditure is as it concerns economic expansion cum growth is dependent
largely on whether it is productive or not.
Most scholars in this area of study are of the opinion that government public expenditure
on socio-economic and physical infrastructure leads to economic growth. Despite the forgoing
assertion, it appears that Nigeria is facing serious difficulties in programming and management of
her public expenditure. Government expenditure is an important macro-economic management
tool that help control demand and money supply in Nigerian economy. It can help put an economy
on the positive trajectory to sustainable growth and development if it is well managed. It helps
government provide fundamental infrastructural facilities needed for growth in health, education,
power, agriculture, transportation, road construction, etc. Prudent government spending through
an efficient allocation of its resources to the different sectors of the economy can be veritable tool
for stimulating economic growth.
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The pattern of government expenditure over the years seem not to have achieved this aim
of growth as expected (Akanbi as cited in Odubuasi et al., 2020, p. 3). Nigerian economy is facing
challenges of dwindling revenue from crude oil on which the country highly rely for sustenance.
This economic downturn is adversely affecting Nigerian government who now rely more on
borrowing to help finance her infrastructural needs, hence leading to inadequate funding of her
projects. It seems as if the desired growth and development is not being seen in the economy due
to non-proper utilization of government capital expenditures in the right way.
It is expected that government expenditure increase will stimulate aggregate demand in the
economy leading to growth of real GDP. The after effect of this growth includes job creation,
increased output among others. Public expenditure as one of the instrument of fiscal policy
influences economic activities in desired ways with the allocation of resources and their use for
the attainment of stability and growth. Due to the forgoing expectation, Akpokerere and Ighoreje
(2013) opined that it is disheartening that the level of government expenditure seems not to have
been replicated in Nigeria economic growth.
The huge government expenditure seem not to be reflecting in the economy as we are still
faced with poor power supply, bad roads, white elephant projects, abandoned projects,
unproductive projects, devaluation of the naira, high dependence on imports, misappropriation,
corruption. The forgoing has led to closure of companies, high unemployment rate, poor standard
of living. It is against this backdrop that this study examined the disaggregated relationship of
government capital expenditure and economic growth in Nigeria for the period 1981 to 2021.
The broad objective of the study was to assess the growth nexus of government capital
expenditure and economic growth in Nigeria for the period 1981 to 2021.
Specifically the study was carried out to: ascertain the relationship between administration
capital expenditure and gross domestic product in Nigeria; assess the relationship between social
& community services capital expenditure and gross domestic product in Nigeria; ascertain the
relationship between economic services capital expenditure and gross domestic product in Nigeria;
examine the relationship between transfers capital expenditure and gross domestic product in
Nigeria.
This led to the formulation of four research hypotheses expressed in null forms as: there
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was no positive and significant relationship between administration capital expenditure and gross
domestic product in Nigeria; there was no positive and significant relationship between social &
community services capital expenditure and gross domestic product in Nigeria; there was no
positive and significant relationship between economic services capital expenditure and gross
domestic product in Nigeria; there was no positive and significant relationship between transfers
capital expenditure and gross domestic product in Nigeria.
This study covered the period from 1981 to 2021 (41 years) and used four independent
variables and one dependent variable.
Conceptual review
John (2017) opined that government expenditure refers to expenses incurred by the
government for the statutory maintenance and provision of public welfare, goods, services and
works needed to foster or promote economic growth and improve the wellbeing of its citizens in
the society. Odubuasi et al (2020) stated that government expenditure can be incurred to acquire
goods and services for current use or on those intended to create future economic benefits such as
infrastructure and investment. Capital expenditure hence can be seen as investments that should
increase assets of the state and as such lead to economic growth and development. It is meant to
be carried out over some years depending on how big the government project is.
Oyediran et al (2016) defined public expenditure as the value of goods and services
provided through the public sector. They further explained that capital expenditure on its part is
government spending on tangible non-current assets which are for the purchase or investment in
items that will be in use for years and be for the provision of goods and services. Government
expenditure are expected to enhance the provision of essential amenities and infrastructures as
good roads, security, education pipe borne water, health, electricity, etc. Oyediran et al (2016).
Capital expenditure refers to the amount spent in the acquisition of fixed (productive) assets
(whose useful life extends beyond the accounting or fiscal year), as well as expenditure incurred
in the upgrade/improvement of existing fixed assets such as lands, building, roads, machines,
equipment, intangible assets (John, 2017). It is therefore expenditure that we expect should create
future benefits as there could be some time difference between when it is incurred and when its
effect is felt in the economy. Anyiwe and Oziegbe (as cited in Yerima, Nymphas, Sani, Auta,
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Amos, & Abwage, 2022, p. 4) opined that economic growth connotes increase in outputs in various
sectors, national product, national income, improved level of technology, health, education and
urbanization. It is imperative therefore, that government expenditure is one of the key determinants
of not just the size of any economy but of economic growth as well. It is expected accordingly that
productive government expenditure would have positive and significant effect on economic
growth.
Government capital expenditure is divided into four sectors namely: general
administration, social & community services, economic services and transfers. The general
administration covers defence, internal security and national assembly; social & community
services covers education, health, other social & community service; economic services covers
agriculture, road & construction, transport & communication, other economic services while
transfers covers public debt servicing, pensions & gratuities, FCT/other CFR charges,
contingencies/subventions.
Theoretical Review
The theoretical underpinning of this work is the Wagner’s Law of increasing state activity
which was developed by the German political economist – Adolph Wagner. The proponent of the
theory had argued that government growth is a function of increased industrialization and
economic development. Also, that public spending is an endogenous factor, which is determined
by the growth of national income, that is, as national income increases it will cause public
expenditure to increase. The Wagner’s Law tends to be a long-run phenomenon: the longer the
time-series, the better the economic interpretations and statistical inferences. Government public
expenditure therefore is seen as an endogenous factor not exogenous (Ogar, Eyo, & Arikpo, 2019).
Empirical Review
Yerima et al (2022) in their study assessed the impact of government expenditure on
economic growth in Nigeria for the period 1986 to 2020. They obtained time series data for the
study and used structural vector auto-regression (SVAR) model as well as pair-wise causality test.
They found out that government expenditure in health and education had an insignificant impact
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on economic growth while public debt had an insignificant impact on economic growth for the
period reviewed.
Aluthge, Jibir and Abdu (2021) investigated the impact of Nigerian government
expenditure (capital and recurrent) on economic growth for the period 1970 to 2019. Data was
obtained from CBN statistical bulletin. The independent variables were capital and recurrent
expenditures while the dependent variable was gross domestic product growth rate. The
autoregressive distributed lag (ARDL) model was used for the analysis. They found out that capital
expenditure had positive and significant impact on economic growth both on the short and longrun, while recurrent expenditure does not have significant impact on economic growth in the shortrun and long-run.
Bennee, Okoye and Amahalu (2021) ascertained the relationship between public
expenditure and economic growth in Nigeria. They obtained data from CBN bulletin and NBS.
The dependent variable was real gross domestic product while independent variables were health
care expenditure and national defence. They adopted longitudinal (ex-post-facto) research design.
Regression analysis was used to test the data using Eviews10 software. They found out that a
significant and positive relationship exist between national defense expenditure and real gross
domestic product, while a negative and non-significant relationship exist between health care
expenditure and real gross domestic product for the period reviewed.
Onifade, Cevik, Erdogen, Asongu and Bekun (2020) did an empirical retrospect of the
impacts of government expenditure on economic growth in Nigerian for the period 1981-2017.
The independent variables used were capital expenditure, recurrent expenditure and government
fiscal expansion. Pesaron’s ARDL approach was used to analyse the time series data obtained.
They found out that recurrent expenditure had significant impact on economic growth, while
public capital expenditure had positive but non-significant impact on economic growth.
Odubuasi, Ifurueze and Ezeabasili (2020) assessed the effect of government expenditure
on economic growth in Nigeria for the period 2004 to 2018. Time series data was used for the
analysis. The independent variables were recurrent expenditure, expenditure on highways, safety
costs and education costs, while the dependent variable was real gross domestic product. Ex-postfacto research design was adopted and regression model used for the analysis. They found out that
government expenditure on highway and safety had positive and significant effect; recurrent
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expenditure had positive but non-significant impact; expenditure on education had a negative sign
and was non-significant to economic growth for the period reviewed.
Ogar, Eyo and Arikpo (2019) assessed the impact of government expenditure on the
economic growth of Nigerian. Their independent variables were capital expenditure, recurrent
expenditure and fiscal deficit, while the dependent variable was gross domestic product. They used
ex-post-facto research design and sourced secondary data from the Central Bank Nigeria statistical
bulletin. Data was analysed using the VAR technique. Their findings showed that government
capital expenditure had a positive but insignificant effect; government fiscal deficit had
insignificant negative effect while government recurrent expenditure had an insignificant positive
effect on the growth of the Nigerian economy for the period reviewed.
Oyediran, Sanni, Adedoyin and Oyewole (2016) ascertained the relationship between
government expenditure and economic growth in Nigeria. The study employed ordinary least
square (OLS). Dependent variable was GDP, while independent variables were capital expenditure
(CAPEXP) and recurrent expenditure (REXP). Time series data for the period 1980 to 2013 were
collected from National Bureau of Statistics (NBS) and Central Bank of Nigeria (CBN) statistical
bulletin. Their findings showed that government expenditure had significant relationship with
economic growth.
Ebong, Ogwumike, Udongwo and Ayodele (2016) examined the impact of government
capital expenditures on economic growth in Nigeria using time series data for the period 1970 to
- The independent variables used to proxy capital expenditure were agriculture, education,
health, economic infrastructure, while GDP proxied economic growth. The OLS technique was
used to analyze the data. They found out that capital expenditures on agriculture did not exert any
significant influence on growth; health capital expenditures had negative and insignificant effect;
expenditures on economic infrastructure had significant positive impact.
Methodology
The “ex-post facto” research design was adopted in this study. Quantitative time series
annual data as regards the Nigerian economy was sourced from Central Bank of Nigeria statistical
bulletin, 2021 edition. The secondary data used was for the period 1981 to 2021. The study used
multiple regression model and the relationship expressed as:
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Yt = b0+b1X1+b2X2+b3X3 … + bnXn + e
Where: Y = dependent variable
b0 = intercept term
b1, b2, b3 = parameters or coefficients of the model
X1, X2, X3 = independent or explanatory variables.
e = error term
The functional relationship of effect of government capital expenditure on Nigeria’s
economic growth can be specified in the following model:
GDP = f(ADCAEXP, SCSCAEXP, ESCAEXP, TRCAEXP)
The models were explicitly defined as follows:
GDPt = b0+b1 ADCAEXP t+b2 SCSCAEXP t+b3 ESCAEXPt+b4 TRCAEXP + et
Where:
GDP = Gross domestic product
ADCAEXP = Administration capital expenditure
SCSCAEXP = Social and community services capital expenditure
ESCAEXP = Economic services capital expenditure
TRCAEXP = Transfers capital expenditure
The independent variables used to proxy capital expenditure were administration
(ADCAEXP), social & community services (SCSCAEXP), economic services (ESCAEXP) and
transfers (TRCAEXP) while gross domestic product (at current basic prices) was the dependent
variable and used to proxy economic growth.
Administration capital expenditure (ADCAEXP) is total government administration
expenditure on general administration, defence, internal security, national assembly. Social and
community services capital expenditure (SCSCAEXP) is total government capital on education,
health, other social and community services. Economic services capital expenditure (ESCAEXP)
is total government capital expenditure on agriculture, road & construction, other economic
services. Transfers capital expenditure (TRCAEXP) is total government capital expenditure on
public debt, debt servicing, pensions & gratuities, FCT/other CFR charges,
contingencies/subventions. Gross domestic product (GDP) is the total output of goods and services
produced in the Nigerian economy for a given period of time usually one year.
Ordinary least square regression analysis was used to test the hypothesis at 5% level of
significance. The processing software used was Eviews10. The a priori expectations of the study
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are that the independent variables (ADCAEXP, SCSCAEXP, ESCAEXP and TRCAEXP) will
have positive and significant effect on the dependent variable (GDP).
Decision Criteria: The hypotheses were tested based on 5% level of significance. The decision
rule was to accept the null hypothesis if the t-statistic is less than 2.0 or p-value greater than 0.05.
Null hypothesis was rejected if the t-statistic is greater than 2.0 or p-value is less than 0.05.
Presentation of Data:
The table below showed the data obtained for the dependent and independent variables.
YEAR
ADCAEXP
(N’B)
SCSCAEXP
(N’B) ESCAEXP (N’B) TRCAEXP (N’B) GDP (N’B)
1981 0.72 1.30 3.63 0.92 139.31
1982
0.39 0.97 2.54 2.52 149.05
1983
1.10 1.03 2.29 0.47 158.75
1984
0.26 0.24 0.66 2.94 165.85
1985
0.46 1.15 0.89 2.96 187.83
1986
0.26 0.66 1.10 6.51 198.12
1987
1.82 0.62 2.16 1.78 244.68
1988
1.90 1.73 2.13 2.59 315.62
1989
2.62 1.84 3.93 6.65 414.86
1990
2.92 2.10 3.49 15.55 494.64
1991
3.35 1.49 3.15 20.36 590.06
1992
5.12 2.13 2.34 30.18 906.03
1993
8.08 3.58 18.34 24.50 1,257.17
1994
8.79 4.99 27.10 30.04 1,768.79
1995
13.34 9.22 43.15 55.44 3,100.24
1996
14.86 8.66 117.83 71.58 4,086.07
1997
49.55 6.90 169.61 43.59 4,418.71
1998
35.27 23.37 200.86 49.52 4,805.16
1999
42.74 17.25 323.58 114.46 5,482.35
2000
53.28 27.97 111.51 46.70 7,062.75
2001
49.25 53.34 259.76 76.35 8,234.49
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2002
73.58 32.47 215.33 0.00 11,501.45
2003
87.96 55.74 97.98 0.01 13,556.97
2004
137.77 30.03 167.72 15.73 18,124.06
2005
171.57 71.36 265.03 11.50 23,121.88
2006
185.22 78.68 262.21 26.27 30,375.18
2007
226.97 150.90 358.38 23.04 34,675.94
2008
287.10 152.17 504.29 17.33 39,954.21
2009
291.66 144.93 506.01 210.20 43,461.46
2010
260.20 151.77 412.20 59.70 55,469.35
2011
231.80 92.85 386.40 207.50 63,713.36
2012
190.50 97.40 320.90 265.90 72,599.63
2013
283.65 154.71 505.77 164.27 81,009.96
2014
229.63 111.29 393.45 48.75 90,136.98
2015
226.81 82.98 348.75 159.82 95,177.74
2016
147.72 68.80 278.95 158.14 102,575.42
2017
328.94 167.66 542.19 203.51 114,899.25
2018
446.25 203.42 753.49 278.94 129,086.91
2019
591.26 264.69 994.19 438.86 145,639.14
2020
417.14 186.74 701.40 309.61 154,252.32
2021
635.73 303.66 1,102.46 480.61 176,075.50
Source: CBN statistical bulletin
Descriptive Statistics
GDP ADCAEXP SCSCAEXP ESCAEXP TRCAEXP
Mean 37550.91 140.1835 67.62812 254.0765 89.88425
Median 8234.494 53.27950 30.03252 200.8619 30.17550
Maximum 176075.5 635.7288 303.6626 1102.465 480.6115
Minimum 139.3105 0.262700 0.237600 0.656300 0.000000
Std. Dev. 50434.86 167.3193 80.03301 277.2859 121.2011
Skewness 1.284324 1.293415 1.185235 1.278570 1.703950
Kurtosis 3.459285 4.102039 3.634651 4.326509 5.253613
Jarque-Bera 11.63186 13.50638 10.28743 14.17676 28.51644
Probability 0.002980 0.001167 0.005836 0.000835 0.000001
Sum 1539587. 5747.525 2772.753 10417.13 3685.254
Sum Sq. Dev. 1.02E+11 1119830. 256211.3 3075499. 587588.6
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Observations 41 41 41 41 41
The descriptive statistics showed a mean value of 77,550.91; 140.1835; 67.62812; 254.0765 and
89,88425 for gross domestic product, administration capital expenditure, social and community
services capital expenditure, economic services capital expenditure and transfers capital
expenditure respectively. The data used was for a period of 41years.
Regression output and interpretation.
Dependent Variable: GDP
Method: Least Squares
Date: 08/16/23 Time: 18:53
Sample: 1981 2021
Included observations: 41
Variable Coefficient Std. Error t-Statistic Prob.
C -237.7909 3753.345 -0.063354 0.9498
ADCAEXP 305.3656 114.5290 2.666273 0.0114
SCSCAEXP -51.49996 209.6165 -0.245687 0.8073
ESCAEXP -63.47059 52.26137 -1.214484 0.2325
TRCAEXP 162.3276 50.61368 3.207188 0.0028
R-squared 0.895724 Mean dependent var 37550.91
Adjusted R-squared 0.884138 S.D. dependent var 50434.86
S.E. of regression 17167.27 Akaike info criterion 22.45325
Sum squared resid 1.06E+10 Schwarz criterion 22.66222
Log likelihood -455.2916 Hannan-Quinn criter. 22.52934
F-statistic 77.30959 Durbin-Watson stat 1.240442
Prob(F-statistic) 0.000000
Estimation Command:
LS GDP C ADCAEXP SCSCAEXP ESCAEXP TRCAEXP
Estimation Equation:
GDP = C(1) + C(2)ADCAEXP + C(3)SCSCAEXP + C(4)ESCAEXP + C(5)TRCAEXP
Substituted Coefficients:
GDP = -237.790920673 + 305.365640865ADCAEXP – 51.4999624979SCSCAEXP – 63.4705896542ESCAEXP + 162.327594479TRCAEXP
The analysis showed that the constant coefficients of B was -237.790920673.
In view of the model used for this study:
GDPt = b0+b1 ADCAEXP t+b2 SCSCAEXP t+b3 ESCAEXPt+b4 TRCAEXP + et ……
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The summary of the linear regression result obtained from the study can be stated as:
GDP = -237.790920673 + 305.365640865ADCAEXP -51.4999624979SCSCAEXP
-63.4705896542ESCAEXP + 162.327594479TRCAEXP …………………
The above regression model on the effect of government capital expenditure on economic
growth of Nigeria showed that GDP averages -237.79 over time. Keeping all other variables
constant except administration capital expenditure, a unit change in administration capital
expenditure will result to a 305.37 increase in gross domestic product. Barring all other variables
constant except social & community services capital expenditure, a unit change in social &
community services capital expenditure will result to a 51.50 decrease in gross domestic product.
Keeping all other variables constant except economic services capital expenditure, a unit change
in economic services capital expenditure will result to a 63.47 decrease in gross domestic product.
Also, keeping all other variables constant except transfers’ capital expenditure, a unit change in
transfers’ capital expenditure will result to a 162.33 increase in gross domestic product.
The regression analysis showed the probability values of the independent variables of
administration capital expenditure (0.0114), social and community services capital expenditure
(0.8073), economic services capital expenditure (0.2325) and transfers capital expenditure
(0.0028). The R-squared value of 0.895724 which implies that 89.6% changes in the dependent
variable (gross domestic product) are explained or influenced by the independent variables
(administration capital expenditure, social and community services capital expenditure, economic
services capital expenditure and transfers capital expenditure). The probability (f=statistic) value
of 0.000000 showed that the independent variables are jointly significant to gross domestic
product. The F-statistic regression value is 77.30959. The Durbin Watson statistic value of
1.249442 is closer to 2 than 0 thereby signifying that there is no first order correlation among
successive residuals.
Test of Hypotheses
Decision rule: Accept the null hypothesis if the significance probability value is greater than the
level of significance (5%), otherwise reject.
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Summary statistics for hypothesis testing:
Hypothesis Variable Coefficient Std. Error t-statistic Probability Decision
One ADCAEXP 305.3656 114.5290 2.666793 0.0114 Reject null
Two SCSCAEXP -51.49996 209.6165 -0.245687 0.8073 Accept null
Three ESCAEXP -63.47059 52.26137 -1.214484 0.2325 Accept null
Four TRCAEXP 162.3276 50.61368 3.207188 0.0028 Reject null
Hypothesis One: H0: Administration capital expenditure has no significant effect on gross
domestic product in Nigeria.
The outcome of the regression analysis showed a positive coefficient and t-statistic
probability of 0.0114 which is lower than the 0.05 level of significance, hence we reject the null
hypothesis and accept the alternate hypothesis. We therefore conclude that administration capital
expenditure has a positive and significant effect on gross domestic product in Nigeria for the period
reviewed.
Hypothesis Two: H0: Social and community services capital expenditure has no significant effect
on gross domestic product in Nigeria.
The outcome of the regression analysis showed a negative coefficient and t-statistic
probability of 0.8073 which is higher than the 0.05 level of significance, hence we accept the null
hypothesis. We therefore conclude that Social and community services capital expenditure has a
negative and non-significant effect on gross domestic product in Nigeria for the period reviewed.
Hypothesis Three: H0: Economic services capital expenditure has no significant effect on gross
domestic product in Nigeria.
The outcome of the regression analysis showed a negative coefficient and t-statistic
probability of 0.2325 which is higher than the 0.05 level of significance, hence we accept the null
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hypothesis. We therefore conclude that economic services capital expenditure has a negative and
non-significant effect on gross domestic product in Nigeria for the period reviewed.
Hypothesis Four: H0: Transfers capital expenditure has no significant effect on gross domestic
product in Nigeria.
The outcome of the regression analysis showed a positive coefficient and t-statistic
probability of 0.0028 which is lower than the 0.05 level of significance, hence we reject the null
hypothesis and accept the alternate hypothesis. We therefore conclude that transfers capital
expenditure has a positive and significant effect on gross domestic product in Nigeria for the period
reviewed.
Discussion of findings
This study disaggregated the capital expenditure of the government and assessed their
individual relationship with gross domestic product. The finding showed that administration
capital expenditure had a positive and significant relationship with gross domestic product in
Nigeria for the period reviewed. This finding is in line with the apriori expectation of the study.
This also agrees with the finding by John (2017) and Odubuasi (2020).
The finding on social & community services capital expenditure showed that it had a
negative and non-significant relationship with gross domestic product. This is in agreement with
the finding of Odubuasi et al (2020) and Yerima et al (2022). It however differ from that of John
(2017) who found a positive and significant relationship. The finding as regards hypothesis two
differs from the apriori expectation of this work. Government hence need to re-appraise her social
& community services capital expenditure pattern and processes so as to reverse the current trend.
The finding on economic services capital expenditure showed a negative and nonsignificant relationship with gross domestic product. This disagrees with John (2017) who found
a negative and significant relationship as well as with Odubuasi et al (2020) who found a positive
and significant relationship. The finding as regards hypothesis three disagrees with the apriori
expectation of this study. It therefore calls for attention on what is causing this negative and nonsignificant effect of economic services capital expenditure on gross domestic product in Nigeria.
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The finding that transfers capital expenditure had a positive and significant relationship
with gross domestic product agrees with the finding by John (2017). The finding of this study
agrees with the apriori expectation hence the current trend should be sustained.
Conclusion
This study examined the growth nexus of disaggregated government capital expenditure
and economic growth in Nigeria for the period 1981 to 2021. The study showed that these
components of capital expenditure are good indices for measuring economic growth of the
Nigerian economy. Therefore, there is the need to encourage and ensure proper use of capital
expenditures so as to help achieve the desired positive and significant effect on gross domestic
product in Nigeria.
Recommendations
1) The Nigerian government should ensure that the administration capital expenditure is properly
used to continue its positive and significant effect on the economy.
2) The Nigerian government should ensure proper channeling of her social & community services
capital expenditures to the relevant sub-sectors so as to trigger production of goods and services
hence stimulating economic growth.
3) The Nigerian government should ensure that her capital expenditure on economic services
should be properly channeled and monitored to help achieve economic growth in Nigeria.
4) The Nigerian government should ensure that the transfers capital expenditure is properly used
to continue its positive and significant effect on the economy.
5) Capital expenditures therefore need to be properly monitored, evaluated before approval to
avoid wastages.
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