Author(s)

Lawal Omoniyi Ganiyu¹, Alabi Nurudeen Olawale¹, Ige Sikiru Ajibade², Ibraheem Rahmat Abisola¹

¹Department of Statistics, Yaba College of Technology, Lagos, Nigeria.
²Department of Mathematics, Yaba College of Technology, Lagos, Nigeria.

This paper is an empirical analysis of provisional unrestricted level relationship between Nigerian domestic output measured by Gross Domestic Product (GDP) and government spending proxied by capital and recurrent expenditures in the presence of static regressors such as crude oil prices and federal government retained revenues. We estimate an ARDL (1,0,1) using a single-equation approach. Results show that government expenditures have negative but statistically insignificant effects on domestic output in the long-run. Similarly, negative short run effects are established amongst the variables. However, recurrent expenditure is statistically significant in the short-run. Whilst federal government retained revenue has a positive and significant effect, crude oil price exhibited negative relationships with domestic output both at level and in the short-run dynamics. Also a high speed of adjustment implies that Nigerian Gross Domestic Product is extremely sensitive to shocks on the government spending in the long-run. An upward trend forecast between 2014 and 2020 is an indication of the continued positive impact and the government retained revenue will exert on the domestic output in the long-run.

Level Relationship, Domestic Output, Government Spending, Single-Equation Approach

Ganiyu, L. , Olawale, A. , Ajibade, I. and Abisola, I. (2016) The Nexus between Nigerian Government Spending and Domestic Output in the Presence of Long-Term Crude Oil Price Shock: A Conditional Unrestricted Equilibrium Correction Model Approach. Open Journal of Statistics, 6, 412-425. doi: 10.4236/ojs.2016.63037.