THE CAUSAL RELATIONSHIP BETWEEN ECONOMIC SERVICES EXPENDITURE AND ECONOMIC GROWTH IN NIGERIA

Abstract

Numerous studies have examined the causal relationship between economic services
expenditure and economic growth, but it is difficult to say for sure if the direction of causality is
beneficial for economic growth. This study is crucial because prior empirical findings' conclusions
have not been universally accepted. The aim of this study, therefore, is to investigate the causal
relationship between economic services expenditure and the growth of the Nigerian economy for
the period of 1981 to 2022. The study applied VECM, ADF and the Granger causality test using
secondary data sourced from the CBN statistical bulletin. The study found that the components of
economic services expenditure and the rate of economic growth in Nigeria have long-term
correlations, and there is a causal relationship between economic services expenditure and the
growth of the Nigerian economy in line with Keynesian theory. The study therefore recommends
that the government increase its spending on roads and construction, transport and communication,
and the federal government's extra-budgetary allocation to stimulate economic growth. Also, a high
degree of transparency and accountability on government spending becomes a prerequisite in all
sectors of the economy in order to prevent mismanagement or misappropriation of funds.