Title:
PUBLIC EXPENDITURE AND INFLATION RATE IN NIGERIA

Authors:
Ologbenla Patrick PhD, Nigeria

Abstract:
This paper examined the relationship between inflation and government spending in Nigeria for the period 1990 to 2022. The study utilized Augmented Dickey-Fuller unit root test, Johansen cointegration; Granger causality Test and Vector Error Correction Model (VECM) approaches. The secondary data variables in consideration are government spending (GEXP), inflation rate (INF), exchange rate (EXR) and broad money supply (MS2) and they were soured from CBN Statistical Bulletins. Although the unit root tests showed that the variables possessed a unit root problem at their level but freed from this at their first order of integration, the Johansen co-integration result showed that the variables were co-integrated. The result indicated that there is a long-run and shortrun bilateral causal relationship between inflation and government spending. The regression estimate based on the short run and long run VECM showed that inflation rate has a positive significant influence on government spending in Nigeria over the study period. Money supply is positively related with government spending in the recent years. Meanwhile exchange rate over the study periods showed a significant reduction in government spending in Nigeria in the recent years because a rise in exchanger rate reduced the value of naira and hence affect the government expenditure negatively