Public Sector Financial Management and Output Growth in Nigeria: A Predictive Causality Test and Two-stage Least Square Approach

Our study empirically investigates the effect of public sector financial management on gross production in Nigeria. The study starts with the review of some theoretical and empirical literature as concerning the public financial management. After examining the stochastic characteristics of each time series by testing their stationarity, the study used predictive causality test, a two-stage least squares (2SLS) an instrumental variables approach for data set from 1970 to 2012. The findings were reinforced by the presence of static equilibrium relationship, as evidenced by the two-stage least squares. Results suggest that time limits set for the realization of these goals would encourage commitment, probity, accountability and transparency by public funds managers. Particular attention needs to be directed to the management of these variables to reverse the current trend. The study therefore, concludes that effective public sector financial management in Nigeria must consider the behavioral pattern, the social context, as well as time limits set for the realization of set goals. This will encourage commitment, probity, accountability and transparency by public funds managers.