Tiers of government spending and private consumption in Nigeria

Abstract

The paper examines the relative impact of federal and state level expenditures as well as capital and recurrent expenditures on private consumption in Nigeria for the period 1981 to 2017. Auto Regressive Distributed Lag estimation method was applied to estimate the desired relationship among the variables. Results showed that on average: federal government spent more than the 36 state governments over the period of this study; both federal government and aggregate state government expenditures impacted positively and significantly on private consumption, with federal government expenditure exerting greater impact than aggregate state government expenditures; aggregate recurrent expenditure crowd-in aggregate private consumption while aggregate capital expenditure crowd-out aggregate private consumption. The paper concludes that expansion in government spending seemed to be effective and generate crowding in effect more at the country level than states level. The stronger impact of the federal spending over states may be a reflection of the suitability of federal government spending over the heterogeneous nature of production and consumption patterns of states in Nigeria.