Budget Implementation and Economic Growth: Imperative for Economic Growth in Nigeria

Bethel Amarachi Onyemaechi and Sydney Clever Keremah
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Bethel Amarachi Onyemaechi: Department of Accounting and Finance, Faculty of Management and Social Sciences, Margaret Lawrence University
Sydney Clever Keremah: Department of Accounting and Finance, Faculty of Management and Social Sciences, Margaret Lawrence University

East African Finance Journal, 2026, vol. 5, issue 2

Abstract: This study examines the impact of government budget implementation on Nigeria’s economic growth from 1994 to 2024, with a focus on capital expenditure, recurrent expenditure, tax revenue, and public debt financing. Using secondary data sourced from the Central Bank of Nigeria Statistical Bulletin and the Federal Inland Revenue Service (FIRS), the study employs a Vector Error Correction Model (VECM) to capture both short-run and long-run dynamics between fiscal variables and Gross Domestic Product (GDP). Empirical findings reveal a significant long-run positive relationship between capital expenditure and economic growth, while recurrent expenditure, tax revenue, and public debt financing exhibit mixed or statistically insignificant effects. The error correction mechanism indicates a slow adjustment to long-run equilibrium, suggesting the presence of structural inefficiencies in fiscal policy transmission. The results support Keynesian theory by highlighting the growth-enhancing role of productive government spending and partially validate Wagner’s Law concerning public expenditure patterns. The study concludes that sustainable economic growth in Nigeria depends on prioritizing capital investment, strengthening fiscal discipline, and enhancing institutional capacity. It recommends improved fiscal governance, transparency, and accountability mechanisms to ensure efficient resource allocation and reduce corruption and mismanagement.

Keywords: Government Budget Implementation; Capital Expenditure; Vector Error Correction Model (VECM); Economic Growth (search for similar items in EconPapers)
JEL-codes: C32 H50 O40 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:cwk:eafjke:2026-16

DOI: 10.59413/eafj/v5.i2.2

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