Author(s): Alexander Ehimare Omankhanlen, Peace Onyedikachi Chimezie, Okoye Uchenna Lawrence
Abstract: The development of the industrial sector remains a contentious issue in Nigeria’s economy. This research examines the impact of Government expenditure on sustainable industrial development in Nigeria. The research adopted Johansen co-integration and vector error correction analysis via E-Views statistical software (version 10.0) for period between 1981 and 2018, to determine long-run impact of public finance on industrial growth in Nigeria. It used time series data extracted from CBN statistical bulletin (2018) and WDI (2018). This research adopts Wagner’s Law named after the German political economist Adolph Wagner (1835-1917), which best explains government expenditure and industrialization. This research study found out that government revenue is statistically insignificant but has a positive effect on industrial development; Manufacturing Value added as a proxy (MVA), a 100% change in GREV will bring about 28% changes in manufacturing output, capital expenditure is however statistically significant and negatively impacts industrial output, a change in CEXP will yield less than a proportional change in MVA by about 52%, recurrent expenditure positively affects industrial growth, although its influence is statistically insignificant, a 100% rise in REXP will cause about 41% increase in manufacturing sector’s growth. Also, a change in capital stock i.e. Gross Fixed Capital Formation (GFCF) will lead to a significant but inelastic and less than proportional change in MVA, thereby depicting inverse relationship. Based on the findings the following conclusions were made: Effective allocations of government revenue as well as the early release and approval of budget proposals will have a meaningful effect on the economy, increase in sustainable investment level alongside required equipment coupled with qualified personnel to properly manage these amenities will ensure improvement of the industrial sector and finally, working incentives in form of tax incentives, promotion and salary increment should be regularly encouraged in the industrial sector in Nigeria.
Keywords: Government Expenditure, Industrial development, sustainability, Wagner’s Law, Johansen co-integration
DOI: 10.37394/23207.2021.18.4WSEAS Transactions on Business and Economics, ISSN / E-ISSN: 1109-9526 / 2224-2899, Volume 18, 2021, Art. #4