SOURCE:

Faculty: Social Sciences
Department: Economics

CONTRIBUTORS:

Okoli, Uju Victoria
Emmanuel C. Onwuka
Ebele, S. Nwokoye

ABSTRACT:

No nation can grow without the development of infrastructure. This study specifically sought to examine how government spending for infrastructural development has impacted on Nigeria’s economic growth during the pre Structural Adjustment Program (SAP), SAP and post SAP periods using the combination of endogenous growth model and unbalanced growth model as the theoretical framework and employing auto regressive distributed lag (ARDL) technique for the period 1970 to 2017 with data obtained from secondary sources. To determine if structural breaks exist within these periods for economic growth and aggregate spending in Nigeria and ascertain the causal link that exists between government spending on infrastructure and Nigeria’s economic growth for the entire period under study. The findings show that the growth rate of government spending for infrastructure on transport, communication, health, education and utility sectors during the pre-SAP and SAP periods have positive impact on the dependent variable (GDPGR). Also, the growth rate of government spending on the communication and utility sectors during the post-SAP and the entire period have positive impact on the dependent variable (GDPGR) while the growth rate of government spending on the transport, health and education sectors have negative impact on economic growth rate. The Zivot-Andrew’s test for structural stability showed that the economy witnessed the worst performance captured by negative growth rate of -12.4 in 1995 during the SAP period while the granger causality test revealed that there exists no causal link between the growth rate of the government spending for infrastructure in the sectors included in the model and economic growth rate in Nigeria. This study concludes that since government spending on the sectors included in the model negatively impacted on economic growth, Nigeria should not adhere to the theory of unbalanced growth even though it was effective in European countries because evidences from Nigeria do not support this theory. Nigeria should rather look inwards to utilise its abundant natural endowments in the petroleum and agricultural sectors so that government spending in these sectors can enable the country achieve infrastructural development which will in turn positively impact on economic growth.