Public Expenditures and Economic Development of Nigeria: A Cointegration and Causality Evaluation

Purpose: This paper investigates the impact of public expenditures on economic development of Nigeria by using the co integration and causality procedure to determine the envisaged relationship. Gross domestic product per capita (GDPPC) was employed as a proxy for economic development while the Central Bank of Nigeria’s sectoral definition of public expenditures were used as proxies for public expenditure, covering the period of 1981-2013. Methodology: Applying the test for stationarity with the Ordinary Least Squuare (OLS), cointegration and causality procedures, the hypothesis that there is no signficant relationship between public expenditures and economic development in Nigeria was rejected. Findings: Also, public expenditures from both the Administration and Transfers sectors were found to be statistically significant at 1% in terms of their effect on the economic development in Nigeria, while the expenditure on economic services, besides its weak effect on economic development, equally failed to meet the a priori expectation. Recommendations: This abysmal performance of public expenditures especially in both the economic sector and the social and community services sector can be explained partly by the gap between the budgeted expenditures and actual expenditures within the period under study, shoddy implementation and most importantly lack of adequate attention to those sectors that impact directly on peoples’ lives namely, economic and social and community services sectors.