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

Bethel Amarachi Onyemaechi; Keremah Sydney Clever

doi:10.59413/eafj/v5.i2.2

Authors

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

DOI:

https://doi.org/10.59413/eafj/v5.i2.2

Keywords:

Government Budget Implementation, Capital Expenditure,, Vector Error Correction Model (VECM), Economic Growth

Abstract

This study examines the impact of government budget implementation on Nigeria’s economic growth from 1994 to 2024, focusing on capital expenditure, recurrent expenditure, tax revenue, and public debt financing. Using secondary data from the Central Bank of Nigeria Statistical Bulletin and the Federal Inland Revenue Service (FIRS), the study applies a Vector Error Correction Model (VECM) to capture both short-run and long-run dynamics between fiscal variables and Gross Domestic Product (GDP). Empirical results indicate a significant long-run positive relationship between capital expenditure and economic growth, while recurrent expenditure, tax revenue, and public debt financing show mixed or insignificant effects. The error correction mechanism highlights a slow adjustment to equilibrium, suggesting structural inefficiencies in fiscal policy transmission. The findings align with Keynesian theory, emphasizing the growth-stimulating role of productive government spending, and partially support Wagner’s Law regarding expenditure patterns. The study underscores that sustainable growth in Nigeria requires prioritizing capital projects, enhancing fiscal discipline, and strengthening institutional capacity. Improved fiscal governance, transparency, and accountability mechanisms should be implemented to ensure effective resource allocation and minimize corruption and mismanagement.

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