EGBETUNDE TAJUDEEN
Publication
This paper analyses the impact of public expenditure on economic growth in Nigeria during the period 1970 to 2010 making use of annual time series data. The study employs the bounds testing (ARDL) approach to examine the long run and short run relationships between public expenditure and economic growth in Nigeria. The bounds test suggested that the variables of interest put in the framework are bound together in the long-run. The associated equilibrium correction was also significant confirming the existence of long-run relationships. Our findings indicate the impact of total public spending on growth to be negative which is consistent with other past studies. Recurrent expenditure however was found to have little significant positive impact on growth. Therefore, government should increase its spending on infrastructure, social and economic activities.
The study determined the growth of financial development in ten selected countries in sub-Saharan Africa from 1980 to 2005. It also investigated the direction of causality between financial development and economic growth, and examined the long-run relationship between financial development and economic growth in sub-Saharan Africa.
Secondary data were used in this study and covered ten countries in sub-Saharan Africa, namely: Central African Republic, Chad, Congo Republic, Gabon, Kenya, Nigeria, Sierra Leone, South Africa, Swaziland and Zambia. Data on broad money (M2), Gross Domestic Product (GDP), capital stock and real interest rate were collected from World Development Indicators database published by World Bank (2007). Descriptive statistic was employed to capture the growth of financial development and a Vector Error Correction Methodology (VECM) was used to capture the long-run relationship between financial development and economic growth as well as direction of causality in the economies.
The results showed that the growth of financial development is inconsistent over the study periods of twenty-five years. All the selected countries experienced a negative growth rate in financial development: sixteen years in Central African Republic; fifteen years in Gabon; fourteen years in Chad, Congo Republic, Kenya and Zambia; twelve years in Swaziland; ten years in Sierra Leone; nine years in Nigeria and South Africa. The empirical results showed that the direction of causality ran from financial development to economic growth (F-test was significant at p < 0.05) in South Africa (F = 4.52), Central African Republic (F = 2.04), Congo Republic (F = 2.92), Gabon (F = 1.84), Nigeria (F = 2.42) and Chad (F = 9.32) while the direction of causality ran from economic growth to financial development (F-test was significant at p < 0.05) in Zambia (F = 7.68); and evidence of bi-directional causal relationship was found (F-test was significant at p < 0.05) in Kenya (F = 3.07), Sierra Leone (F = 3.32 ) and Swaziland (F = 3.34). The results further showed that there was significant long-run relationship between financial development and economic growth for all the selected countries in sub-Saharan Africa. The result showed that the coefficients of Error Correction Model (ECM) were negative and significant at p < 0.05 (with maximum coefficient of –0.342 for Nigeria, t-value of –7.2766 and minimum coefficient of –0.106 for Zambia, t-value of –4.0769) for the selected countries in sub-Saharan Africa. This means that any disequilibrium between economic growth and financial development will be corrected by 34% for Nigeria and 11% for Zambia while other countries fell within 34% and 11%.
The study concluded that sub-Saharan African countries can accelerate their economic growth by improving their financial systems via financial liberalization.
The paper examines the relationship between commercial bank credits indicators and rural economic growth in Nigeria. Using a double-log equation within the context of Ordinary Least Square (OLS) framework and co-integration test, the study finds that rural economic growth is co-integrated with bank credits indicators in Nigeria. Within the OLS framework, the evidence of positive relationship exist between rural economic growth and commercial bank rural loans as well as commercial bank loans to agriculture and rural economic growth at p < 0.01 in the economy, while deposits of rural dwellers were negatively impacted on rural economic growth at p < 0.01. Based on these results, the paper argues that the rate at which commercial bank credits in terms of loans and deposits of rural dwellers contributed to rural economic growth in Nigeria were very high. Therefore, these indicators of commercial bank credits in the development of economic activities in rural areas should be properly managed in order to improve the well-being of the rural dwellers which in turn improve economic growth in Nigeria.
The paper examined the causal nexus between public debt and economic growth in Nigeria between 1970 and 2010 using a Vector Autoregressive (VAR). The variables used in the study were tested for stationarity using the Augmented Dickey Fuller and Philip Perron test. The result showed that the variables are stationary at first differencing. Co-integration test was also performed and the result revealed the presence of co-integration between public debt and economic growth. The co-integration results show that public debt and economic growth have long run relationship. The findings of the VAR model revealed that there is a bi-directional causality between public debt and economic growth in Nigeria. The paper concluded that public debt and economic growth have long run relationship, and they are positively related if the government is sincere with the loan obtained and use it for the development of the economy rather than channel the funds to their personal benefit.
The paper examines the relationship between external debt and economic growth in Nigeria. Using a double-log equation within the context of Ordinary Least Square (OLS) framework and co-integration test, the study finds that economic growth is co-integrated with external debt, domestic debt and debt services in Nigeria. Within the OLS framework, the evidence of positive relationship between economic growth and external debt as well as domestic debt and economic growth was found at p < 0.05 in the economy, while debt services were negatively impacted on economic growth at p < 0.05. Based on these results, the paper argues that the rate at which borrowings contribute to economic growth in Nigeria was low; it may be as a result of mismanagement of the resources obtained as loan. However, to stimulate the process of development in the economy when the borrowings are being obtained either domestically or internationally, government should have a specific purpose for the said loan before embarking on it, and it must be adequately used for the purpose of the loan in order to effect positively on the process of economic development in the country.
The paper examines the long run and causal relationship between ï¬nancial development and economic growth for ten countries in sub-Saharan Africa. Using the vector errorcorrection model (VECM), the study ï¬nds that ï¬nancial development is cointegrated with economic growth in the selected ten countries in sub-Saharan Africa. That is there is a long run relationship between ï¬nancial development and economic growth in the selected sub-Saharan African countries. The results show that ï¬nancial development Granger causes economic growth in Central African Republic, Congo Republic, Gabon, and Nigeria while economic growth Granger causes ï¬nancial development in Zambia. However, bidirectional relationship between ï¬nancial development and economic growth was found in Kenya, Chad, South Africa, Sierra Leone and Swaziland. The results show the need to develop the ï¬nancial sector through appropriate regulatory and macroeconomic policies. However, in Zambia emphasis needs to be placed on economic growth to propel ï¬nancial development.
The paper examines the long run and causal relationship between financial development and economic growth for ten countries in sub-Saharan Africa. Using the vector error correction model (VECM), the study finds that financial development is co-integrated with economic growth in all selected ten countries in sub-Saharan Africa. Moreover, this test supports the estimated coefficient of the error correction terms found statistically significant with a negative sign, which confirmed that there was not any problem in long run equilibrium between financial development and economic growth in the countries. Granger causality based on multivariate VECM further shows that financial development Granger causes economic growth in Burundi, Cameroon, Mali and Nigeria while economic growth Granger causes financial development in Benin, Burkina Faso, Madagascar and Malawi. Within the same framework, the evidence of bidirectional causality shows between financial development and economic growth in Cote dIvoire and Ghana. Based on these results, the paper argues that financial development could help promote economic growth in four countries while economic growth could help promote financial development in four countries, and financial development and economic growth promote one another in two countries. However, to achieve these goals, financial markets need to be further developed through appropriate regulatory and macroeconomic policies which in turn accelerate economic growth in sub-Saharan Africa.
