Public Expenditure And Financial Accountability In The Economy
Nwulu Stephen, O
Department of Finance and Banking, Faculty of Management Sciences, University of Port Harcourt, Nigeri
Ogunbiyi Samuel, S. (Ph.D.)
Department of Finance and Banking, Faculty of Management Sciences, University of Port Harcourt, Nigeria
Keywords: Public Expenditure, Financial Accountability, Capital Expenditure, Recurrent Expenditure, Auto Regressive Distributive Lag, Gross Domestic Product
Abstract
The objective of this paper was to examine empirically the contribution of the individual components and joint effects of capital and recurrent expenditure on the Nigerian economy using data from 1981 to 2020. The data was collected from the annual CBN statistical bulletin and analysed by Eviews. The dependent variable was GDP at constant basic prices or real GDP which is a proxy for the Economic growth. The two dimensions of public expenditure; capital and recurrent are the explanatory variables. The two dimensions were further broken down to their components: administration, economic services, social and community services and transfers. Auto regressive distributive lag (ARDL) models were employed based on the assumption that GDP is persistent and can be determined by its previous value. Results show that (i) the recurrent expenditure is significantly greater than the capital expenditure in the period under review, (ii) GDP and capital expenditure trended over time, though Capital expenditure (CAPEX) and its components appear to be affected by policy shocks and exogenous factors in later years specifically in 2016 and 2019, (iii) In the CAPEX-Growth model, all the coefficients are statistically significant except transfers. Economic Services is negatively signed, (iv) CAPEX variables have significant joint impact on GDP, (v) No recurrent expenditure component is statistically significant with Social and Community service and transfers having negative coefficients, and (vi) joint impact of recurrent expenditure on GDP is significant but less than that of CAPEX. Finally, this paper concludes that the effect of capital expenditure is more felt on the economy than recurrent expenditure. Therefore, the government should see that capital expenditure is given more attention if the growth objective of the economy would be achieved