Global Journal of Economics And Finance

Global Journal of Economics and Finance Vol. 2(1) pp. 1-11, February  2013                                                                           
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The Impact of Public Capital Expenditure and Economic Growth in Nigeria

ONAKOYA*1, Adegbemi Babatunde and SOMOYE2, Russell Olukayode Christopher

1Department of Economics, College of Social and Management Sciences,Tai Solarin University of Education, Ijagun, Ijebu Ode, Nigeria

2Business School,University of the West of Scotland,Paisley, PA1 2BE, Scotland, UK

Russell.Somoye@uws.ac.uk and olukayodesomoye@hotmail.com

*corresponding author’s E-mail: adegbemionakoya@yahoo.com

Abstract

This paper examines the impact of public capital expenditure on economic growth in Nigeria in the context of macro-econometric framework at sectoral levels. The research adopts a three-stage least squares (3SLS) technique and macro-econometric model of simultaneous equations to capture the disaggregated impact of public capital expenditure on the different sectors of the economy. The study shows that public capital expenditure contributes positively to economic growth in Nigeria. The results also indicate that public capital expenditure directly promotes the output of oil and infrastructure but is directly deleterious to the output of manufacturing and agriculture. The results suggest a positive but insignificant relationship to the services sector. The results however confirm that public capital spending indirectly enhances economic growth by encouraging private sector investments due to the facilitating role of government in the provision of public goods. This study therefore recommends the privatisation of the State owned enterprises and use of the public-private–partnership (PPP) arrangements to engender efficiency and effectiveness in public service delivery.

Key words: Government Expenditure, Capital Expenditure, Economic Growth, Macro-econometric Model.

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