IDEAS home Printed from https://ideas.repec.org/a/mth/ber888/v5y2015i2p136-152.html

Effect of Government Capital Expenditure on Manufacturing Sector Output in Nigeria

Author

Listed:
  • Falade Olanipekun Emmanuel

  • Olagbaju Ifeolu Oladiran

Abstract

The study investigates the relationship between government expenditure and manufacturing sector output in Nigeria. Government expenditure is disaggregated into capital and recurrent with a view to analyse the relative effect of these categories of government expenditure with emphasis on the capital component. The study employed time series data from 1970 to 2013. Data on manufacturing sector output, capital and recurrent expenditure, nominal and real Gross Domestic Product (GDP), exchange rate and interest rate were collected from Statistical Bulletin and Annual Report and Statement of Accounts published by the Central Bank of Nigeria (CBN). Econometric evidence revealed stationarity of the variables of interest at their first difference while the Johansen cointegration approach also confirms the existence of one cointegrating relationship at 5 percent level of significance. In addition, error correction estimates revealed that while government capital expenditure has positive relationship with manufacturing sector output in Nigeria, recurrent expenditure exerts negative effect on manufacturing sector output. The results showed that one per cent increase in government capital expenditure resulted in an increase of 11.2 per cent in manufacturing sector output while recurrent expenditure decreases it by 26.9 per cent. This reveals that government capital expenditure has positive impact on manufacturing sector output. The study therefore suggests that larger percentage of government expenditure in the annual budget should be on capital component coupled with improved implementation of expenditure policies rather than recurrent expenditure which does not really have a significant impact on the manufacturing sector.

Suggested Citation

  • Falade Olanipekun Emmanuel & Olagbaju Ifeolu Oladiran, 2015. "Effect of Government Capital Expenditure on Manufacturing Sector Output in Nigeria," Business and Economic Research, Macrothink Institute, vol. 5(2), pages 136-152, December.
    • Handle: RePEc:mth:ber888:v:5:y:2015:i:2:p:136-152
    as

    Download full text from publisher

    File URL: http://www.macrothink.org/journal/index.php/ber/article/view/8241/6703
    Download Restriction: no
    File URL: http://www.macrothink.org/journal/index.php/ber/article/view/8241
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Muritala, Taiwo & Taiwo, Abayomi, 2011. "Government expenditure and economic development: empirical evidence from Nigeria," MPRA Paper 37293, University Library of Munich, Germany.
    2. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 70(1), pages 65-94.
    3. Robert J. Barro & Paul M. Romer, 1991. "Economic Growth (1990)," NBER Books, National Bureau of Economic Research, Inc, number barr91-1, December.
    4. Barro, Robert J, 1990. "Government Spending in a Simple Model of Endogenous Growth," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 103-126, October.
    5. Olorunfemi Sola & Tomola M. Obamuyi & Felix O. Adekunjo & E.O Ogunleye, 2013. "Manufacturing Performance in Nigeria: Implication for Sustainable Development," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(9), pages 1195-1213, September.
    6. Olorunfemi Sola & Tomola M Obamuyi & Felix O Adekunjo & E.O Ogunleye, 2013. "Manufacturing Performance in Nigeria: Implication for Sustainable Development," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 3(9), pages 1195-1213.
    7. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 407-443.
    8. Clement A.U. Ighodaro & Dickson E. Oriakhi, 2010. "Does The Relationship Between Government Expenditure And Economic Growth Follow Wagner’s Law In Nigeria?," Annals of the University of Petrosani, Economics, University of Petrosani, Romania, vol. 10(2), pages 185-198.
    9. Neill, Jon R., 1996. "Fueling the engine of growth with investment in infrastructure: A lesson from neoclassical growth theory," Journal of Macroeconomics, Elsevier, vol. 18(3), pages 521-529.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Oseni, Isiaq Olasunkanmi & Oyelade, Aduralere O., 2023. "Effect of Capital Expenditure on Unemployment Rate in Nigeria," African Journal of Economic Review, African Journal of Economic Review, vol. 11(3), June.
    2. Atif khan Jadoon & Syeda Azra Batool & Ambreen Sarwar & Maria Faiq Javaid & Dur a Shahwar, 2021. "An Investigation into the Channel of Public Expenditure to Boost Industrial Productivity in Pakistan," iRASD Journal of Economics, International Research Alliance for Sustainable Development (iRASD), vol. 3(2), pages 93-105, September.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. M.Rosaria Alfano & A. Laura Baraldi, 2008. "The design of electoral rules and their impact on economic growth: the Italian case," Working Papers 3_2008, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
    2. Dimitrios PAPARAS & Christian RICHTER & Alexandros PAPARAS, 2015. "Fiscal Policy and Economic Growth, Empirical Evidence in European Union," Turkish Economic Review, KSP Journals, vol. 2(4), pages 239-268, December.
    3. Arvanitidis, Paschalis & Petrakos, George & Pavleas, Sotiris, 2007. "Determinants of economic growth: the experts’ view," Papers DYNREG20, Economic and Social Research Institute (ESRI).
    4. Chua, Hak B., 1993. "Regional Spillovers and Economic Growth," Center Discussion Papers 321327, Yale University, Economic Growth Center.
    5. Jorge Martinez-Vazquez & Violeta Vulovic & Yongzheng Liu, 2011. "Direct versus Indirect Taxation: Trends, Theory, and Economic Significance," Chapters, in: Emilio Albi & Jorge Martinez-Vazquez (ed.), The Elgar Guide to Tax Systems, chapter 2, Edward Elgar Publishing.
    6. van de Klundert, T.C.M.J. & Smulders, J.A., 1991. "Reconstructing growth theory : A survey," Other publications TiSEM 19355c51-17eb-4d5d-aa66-b, Tilburg University, School of Economics and Management.
    7. Andrés Rodríguez-Pose & Yannis Psycharis & Vassilis Tselios, 2012. "Public investment and regional growth and convergence: Evidence from Greece," Papers in Regional Science, Wiley Blackwell, vol. 91(3), pages 543-568, August.
    8. Gupta, Dipak K. & Madhavan, M. C. & Blee, Andrew, 1998. "Democracy, economic growth and political instability: An integrated perspective," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 27(5), pages 587-611.
    9. Amit Nandan & Hrushikesh Mallick, 2022. "Do growth-promoting factors induce income inequality in a transitioning large developing economy? An empirical evidence from Indian states," Economic Change and Restructuring, Springer, vol. 55(2), pages 1109-1139, May.
    10. Khan, Abdul Qayyum Khan & Khattak, Naeem U Rehman Khattak & Hussain, Anwar Hussain & Jehanzeb, Jehanzeb, 2008. "Crowding-in Effect of Budget Deficit: Evidence from Pakistan (1960-2005)," MPRA Paper 42010, University Library of Munich, Germany.
    11. Yawovi Mawussé Isaac Amedanou, 2022. "Financing the economy in debt times: the crucial role of public-private partnerships," Working Papers hal-03545244, HAL.
    12. Turnovsky, S., 2000. "Growth in an Open Economy: some Recent Developments," Papers 5, Warwick - Development Economics Research Centre.
    13. repec:ebl:ecbull:v:2:y:2002:i:1:p:1-15 is not listed on IDEAS
    14. Alali, Walid Y., 2009. "Economic Performance and Institutions: Measuring Technical Efficiency Using SPF Approach," MPRA Paper 114336, University Library of Munich, Germany, revised Aug 2009.
    15. Forson, Joseph Ato & Janrattanagul, Jakkaphong & Carsamer, Emmanuel Carsamer, 2013. "Culture Matters: A Test of Rationality on Economic Growth," MPRA Paper 56825, University Library of Munich, Germany.
    16. Frederic Tournemaine & Pongsak Luangaram, 2012. "R&D, human capital, fertility, and growth," Journal of Population Economics, Springer;European Society for Population Economics, vol. 25(3), pages 923-953, July.
    17. Xavier Sala-i-Martin, 2002. "15 Years of New Growth Economics : What Have we Learnt?," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 5(2), pages 5-15, August.
    18. Chinwuba Okafor & Ibrahim Shaibu, 2016. "Modelling Economic Growth Function in Nigeria: An ARDL Approach," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 3(1), pages 84-93.
    19. Pula Lekë & Elshani Alban, 2018. "Role of Public Expenditure in Economic Growth: Econometric Evidence from Kosovo 2002–2015," Baltic Journal of Real Estate Economics and Construction Management, Sciendo, vol. 6(1), pages 74-87, June.
    20. Palakiyèm Kpemoua, 2016. "Levels Of Education And Economic Performances Of Togo [Niveaux D’Education Et Performances Economiques Du Togo]," Working Papers halshs-01506650, HAL.
    21. Sarno, Lucio, 1999. "Stochastic growth: Empirical evidence from the G7 countries," Journal of Macroeconomics, Elsevier, vol. 21(4), pages 691-712.

    More about this item

    Keywords

    ;
    ;
    ;

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mth:ber888:v:5:y:2015:i:2:p:136-152. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Technical Support Office The email address of this maintainer does not seem to be valid anymore. Please ask Technical Support Office to update the entry or send us the correct address (email available below). General contact details of provider: http://www.macrothink.org/journal/index.php/ber .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.