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Abstract

Over the years, government expenditure and economic process have continued to occupy a series of dialogue among students and policymakers. The common accord among researchers is that government expenditure has been acknowledged as a crucial equipment that the government uses to influence the performance of the economy. The channel through which public authorities satisfy the collective wish of the individuals may be classified underneath public sector expenditure. There is a need to understand the influences of government expenditures on growth in Nigeria. This study seeks to measure the degree of government expenditures shocks on economic growth in Nigeria and Vector Error Correction mechanism and also the impulse response to trace transmission of shocks between government debt and economic growth in Nigeria. The result shows a strong impulse response of GDP from one period of a shock to ten periods of domestic debt outstanding (DOMD). The shock was positive and very significant on the GDP; this influence also shows that government domestic debt can predict economic growth in future. Based on the findings of the paper, it is recommended that government should increase its expenditure to further drive economic growth in Nigeria. Furthermore, the monetary authority in Nigeria should ensure that the value of the naira is protected; this will lead to an appreciation of the naira and further increase economic growth.