Government Size and Economic Growth in Nigeria: An Assessment

Abstract

As the size of the federal government expands in tandem with debt, economic growth rather looks gloomy despite the country’s emergence from two recessions in four years. Although the situation provokes studies with robust outcomes, however, there is no convergence in findings. As such, in the attempt to contribute to the empirics, this paper assesses the relationship between government size and economic growth using the Johansen co-integration technique on time series data covering the period 1981-2020. A long-run relationship is affirmed as expenditure on transfers Granger-causes economic growth while economic growth Grangercauses social and community services, and a no-causality is established between economic growth and every other component of expenditure. Nonetheless, expenditure on social and community services impact economic growth negatively even as economic services and transfers promote growth. Thus, with disaggregated recurrent expenditure, government size exhibits both positive and negative relationships with economic growth in Nigeria. In effect, more budgetary allocation is suggested for economic services.