Unpacking the impact of military spending on economic growth in resource-rich nations

Michael Aondohemba Akume () and Seyi Akadiri
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Michael Aondohemba Akume: Afreximbank

International Journal of Economic Policy Studies, 2025, vol. 19, issue 2, No 2, 275-298

Abstract: Abstract In this study, we explore Emile Benoit's seminal work from 1978, where he championed the idea that military spending could be a catalyst for economic growth. Our research delves into the multifaceted impact of military expenditure on economic development, embracing both linear and nonlinear dimensions. We meticulously account for other pivotal macroeconomic factors, including exchange rates, foreign direct investment, inflation, and total public debt. Our investigation spans from 1980 to 2021, with Nigeria as our focal point. To empirically analyze this relationship, we employ the Autoregressive Distributed Lag (ARDL) framework and introduce a nonlinear ARDL model, considering the statistical characteristics of the data series. Our empirical findings unveil intriguing nonlinear and asymmetric associations between military spending and economic growth in the Nigerian context. We ascertain that positive military expenditure yields a positive yet statistically insignificant impact on economic growth. In contrast, negative military spending exerts a notably negative and statistically significant influence on economic growth, persisting in both short-term (0.072) and long-term (0.265) dynamics. Addressing the economic implications of military expenditure in Nigeria requires a balanced approach. Enhancing fiscal transparency and accountability in defence expenditures, coupled with efforts to diversify the economy, can mitigate the adverse effects of military spending on growth. Furthermore, fostering institutional reforms and investing in human capital development can help reduce the dependence on resource rents and promote sustainable economic growth.

Keywords: Military spending; Inflation; Exchange rate; Economic growth; Nigeria (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s42495-025-00151-9

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