The Multiplier Effect of Economic Service Expenditure on Nigeria’s Gross Domestic Product
Abstract
This study empirically examined the multiplier effect of economic service expenditure on economic growth in Nigeria, using annual time-series data from 1981 to 2025. The analysis evaluated the impact of government outlays in Agriculture (AEXP), Road and Construction (RCEXP), Transport and Communication (TCEXP), and Other Economic Services (OESEXP) on Real Gross Domestic Product (RGDP). Employing both the Autoregressive Distributed Lag (ARDL) Bounds Testing framework and the Johansen Cointegration technique, the study ensured robust long-run estimates. The empirical findings confirmed a long-run equilibrium relationship among the variables, as indicated by an ARDL F-statistic of 14.21, which exceeded the 1 percent critical value. Sectoral analysis identified Transport and Communication as the primary driver of growth, with a multiplier of 2.69, followed by Road and Construction at 1.30. In contrast, the Agricultural sector demonstrated a negative multiplier of -1.93, indicating that structural leakages and insecurity have reduced the effectiveness of fiscal interventions in this sector. Diagnostic tests, including CUSUM and CUSUM of Squares, validated the stability of model parameters despite macroeconomic volatility. The speed of adjustment is notably slow, estimated at approximately 2.1 percent per year. The study concluded that sustainable growth in Nigeria requires prioritizing high-multiplier infrastructure sectors and conducting an institutional audit of agricultural spending to address fiscal inefficiencies.
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