Impact of Government Expenditure on Private Investment in Nigeria: 1986 -2016

Abstract

This study empirically examined the impact of government expenditure on private investment in Nigeria from 1986-2016. Time series data and econometric tools were used to test for the stationarity, and co-integration, while Auto Regressive Distributed Lag Model were adopted to estimate the long-run and short run impact of government expenditure and private investment in Nigeria. From the ARDL result it was shown that government recurrent expenditure and inflation rate in Nigeria have positive impact on private investment in Nigeria. On the other hand, the ECM results revealed that all the independent variables were positively related to private investment in Nigeria and based on the probability of the results all the independent variables were statistically significant in explaining the variation in private investment in Nigeria. Therefore, the study recommends that the government should adopt expansionary policy in order to increase the level of expenditure and in turn improve the level of private sector investment in Nigeria. This is because increased expenditure will increase the effective demand which in turn will increase the production level of private investors.