Sectoral Composition of Government Expenditure and Development Outcomes in Nigeria

Abstract

The budget is the primary function of the government. Due to inefficiency of sectoral allocations in Nigeria, the study therefore seeks to examine how sectoral composition of government expenditure influences development outcomes in Nigeria, employing data from the publications of central bank of Nigeria's statistical bulletin and World Development Indicators from 1986 to 2023. The study employed descriptive research design and expo facto research design. To achieve this objective, the study employs the Autoregressive Distributed Lag (ARDL) technique. Findings show that budgetary allocations of government expenditure to economic services and social/community services have a positive and insignificant relationship with economic development in Nigeria in the short-run, sectoral allocations of government expenditure to economic services has a positive and insignificant relationship with economic development in the longrun and sectoral allocations of government expenditure to social and community services has a positive and significant impact on economic development in Nigeria. Moreover, the diagnostic test result shows robustness of the model, satisfying the ordinary least squares assumptions of no autocorrelation, no multicollinearity, and no heteroskedasticity in the regression result. The study, therefore, recommends that the Federal Ministry of Finance, Budget and Planning should raise allocations for economic services such as agriculture, infrastructure, and electricity and social/community services such as education and health, to at least 20-25% of total expenditure to build skills and capacities for an increase in productivity and as well strengthen monitoring, transparency, and accountability mechanisms to ensure that allocated funds to sectors of the economy are utilize optimally.