Nexus Between Public Finance and Economic Growth in Nigeria

Abstract

Public finance deals with various roles and activities of the government aimed at ensuring economic growth. This study assessed the nexus between public finance and economic growth in Nigeria. It adopts the theory of Peacock; it states that a country could evolve after encountering social disturbances. Such financial difficulties are expected to increase government spending leading to national growth. Secondary data sources gotten from CBN and World Development Indicators are used. Data analysis is done using Unit Root test, Auto-Regressive Distributed Lag (ARDL) and granger causality technique for period 1981 to 2017. Results of the study indicate that Government revenue (GREV) has a major effect on development of Nigeria’s economy, Government expenditure (GEXP) has not substantially but significantly impacted economic growth via the outcomes of Recurrent expenditure(REXP) and capital expenditure (CEXP), and in conclusion Gross domestic savings (GDS) has not impacted Nigeria's economic growth. The recommendation made based on the findings are; In order to ensure aggregate productive public expenditures, the government of Nigeria should ensure that the composition of public sector outputs is optimal. This can be done by ensuring it does not produce either too much of one good or too little of another,the government of Nigeria through various investment schemes and programs that are tax exempt can promote the practice of saving in the country. Investing in such saving schemes can considerable promote individuals tax savings which in turn increases gross domestic savings.