PUBLIC SPENDING DYNAMICS AND ECONOMIC GROWTH IN NIGERIA: AN EMPIRICAL ANALYSIS.

Abstract

Public expenditure plays a significant role in improving the economic performance of any country particularly developing countries like Nigeria where fiscal policy in its growth and development. despite the increase in government spending, the growth in the has remains unstable, affecting the effectiveness of public allocation of resource. Against his background, the study, therefore, examined the relationship between public spending components and economic growth in Nigeria, focusing on the influence of capital expenditure, recurrent expenditure, and inflation rate on the gross domestic product (GDP). Using time series data covering ht period 1994-2023. A sample period of 30 years was selected, and data were analyzed using multiple regression analysis the examine the effects of capital expenditure, recurrent expenditure and inflation on Gross Domestic Product. The resulted indicated that capital expenditure had a significant negative effect on GDP (β = -19.8039, p = 0.0262), suggesting inefficiencies and misallocation in public investment projects. Conversely, recurrent expenditure showed a significant positive impact on GDP (β = 23.9055, p = 0.0000), implying that operational spending, including salaries and maintenance, stimulates economic activities and supports growth. Inflation rate exerted a significant negative influence on GDP (β = -1322.020, p = 0.0452), indicating that rising price levels hinder economic performance. The model demonstrated a strong explanatory power with an R² of 0.974, confirming that 97.4% of variations in GDP were explained by public spending dynamics. The study concluded that while recurrent expenditure promotes economic growth, inefficiencies in capital expenditure and inflation undermine Nigeria’s economic performance. Among others, the study recommended that the government should strengthen transparency and accountability in capital project execution to ensure effective resource utilization and foster sustainable growth.