PUBLIC EXPENDITURE AND ECONOMIC GROWTH IN NIGERIA: A NON-LINEAR ANALYSIS

Abstract

As an emerging economy, Nigeria needs to have an optimal public expenditure and thus, efficiently allocate its scarce resources to attain a high growth rate. This will only be possible by estimating the optimum size of government expenditure, hence compare it with the actual size and implement some policy measures accordingly.. Explicitly, the paper was conceived to determine the level of government expenditure that can be denoted as being able to promote the growth of Nigerian economy, Smooth Transition Regression (STR) model was employed to help accomplished the objective of the study.The findings from the estimate revealed that the association between public expenditure and economic improvement in Nigeria possesses some element of nonlinearity with a threshold value of N1, 212,832,925,742.03 which is the threshold value of public expenditure that can be ruled as capable of improving the Nigerian economy, and that public expenditure is above the optimal level. However, public expenditure was found to exhibit a positive and significant impact on economic growth in both directions.  Nigeria needs to have optimal public expenditure and thus, efficiently allocate its scarce resources between the public and private use to attain a high growth rate. This will only be possible by estimating the optimum size of government expenditure, henceforth, compare it to actual size and implement some policy measures accordingly. However, there are few studies, if any; that tries to undertake such analysis using smooth transition regression (STR) model which could best pinpoint the needed information in that relation.