Effect of Government Capital Expenditure on Manufacturing Sector Output in Nigeria

Falade Olanipekun Emmanuel () and Olagbaju Ifeolu Oladiran ()

Business and Economic Research, 2015, vol. 5, issue 2, 136-152

Abstract: The study investigates the relationship between government expenditure and manufacturing sector output in Nigeria. Government expenditure is disaggregated into capital and recurrent with a view to analyse the relative effect of these categories of government expenditure with emphasis on the capital component. The study employed time series data from 1970 to 2013. Data on manufacturing sector output, capital and recurrent expenditure, nominal and real Gross Domestic Product (GDP), exchange rate and interest rate were collected from Statistical Bulletin and Annual Report and Statement of Accounts published by the Central Bank of Nigeria (CBN). Econometric evidence revealed stationarity of the variables of interest at their first difference while the Johansen cointegration approach also confirms the existence of one cointegrating relationship at 5 percent level of significance. In addition, error correction estimates revealed that while government capital expenditure has positive relationship with manufacturing sector output in Nigeria, recurrent expenditure exerts negative effect on manufacturing sector output. The results showed that one per cent increase in government capital expenditure resulted in an increase of 11.2 per cent in manufacturing sector output while recurrent expenditure decreases it by 26.9 per cent. This reveals that government capital expenditure has positive impact on manufacturing sector output. The study therefore suggests that larger percentage of government expenditure in the annual budget should be on capital component coupled with improved implementation of expenditure policies rather than recurrent expenditure which does not really have a significant impact on the manufacturing sector.

Keywords: Government capital expenditure; Manufacturing sector output; Cointegration (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://www.macrothink.org/journal/index.php/ber/article/view/8241/6703 (application/pdf)
http://www.macrothink.org/journal/index.php/ber/article/view/8241 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mth:ber888:v:5:y:2015:i:2:p:136-152

Access Statistics for this article

Business and Economic Research is currently edited by Daisy Young

More articles in Business and Economic Research from Macrothink Institute
Bibliographic data for series maintained by Technical Support Office ( this e-mail address is bad, please contact ).