Government Expenditure and Private Consumption in Nigeria: An Empirical Investigation

International Journal of Economics and Management Studies

© 2020 by SSRG - IJEMS Journal

Volume 7 Issue 1

Year of Publication : 2020

Authors : Pius Effiong Akpan, Johnson A. Atan

10.14445/23939125/IJEMS-V7I1P111

How to Cite?

Pius Effiong Akpan, Johnson A. Atan, "Government Expenditure and Private Consumption in Nigeria: An Empirical Investigation," SSRG International Journal of Economics and Management Studies, vol. 7,  no. 1, pp. 75-85, 2020. Crossref, https://doi.org/10.14445/23939125/IJEMS-V7I1P111

Abstract:

This study empirically examined the effect of government expenditure on private consumption in Nigeria using the Auto Regressive Distributed Lag(ARDL) approach from 1981 to 2018.To establish the model's short and long relationship, the study employed time-series data of government expenditure components (recurrent and capital) and private consumption. The unit root and cointegration tests were conducted on all the variables, and the results revealed the existence of stationarity and long-run equilibrium relationship,respectively. The empirical results of the long-run model showed recurrent expenditure as having a significant relationship with private consumption in Nigeria, while capital expenditure revealed an insignificant relationship.The results further indicated a positive and significant relationship between private consumption and Gross Domestic Product in Nigeria both in the short andlong run. The results of the short-run analysis revealed a positive but insignificant relationship between private consumptionand government expenditure (recurrent and capital expenditure) in Nigeria.This positive relationship between the government's recurrent expenditure and private consumption confirms the government's current position that is aimed at increasing recurrent spendingto boost the economy out of the current recession.Therefore, this study recommended,among others, that the Nigerian government should encourage more recurrent spending inorder to increase private consumption and reduce the recessionary effect on aggregate demand.

Keywords:

Gross Domestic Product, Private Consumption, Recurrent Expenditure, Capital Expenditure, ARDL

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