An Empirical Analysis of Fiscal Expansion on Defence and Economic Growth in Nigeria
Bridget Ngodoo Mile & PhilipTerhemen Abachi
Department of Economics,
Benue State University, Makurdi
Corresponding Author: Victor Ushahemba Ijirshar
ABSTRACT
This paper examines the relationship between fiscal expansion on defence and economic growth in Nigeria for the period 1981-2011. It is bore out of the fact that it is difficult to say whether the ever increasing rate of defence expenditure over the years has impacted positively or negatively on the economic growth in Nigeria. A number of macroeconomic variables such as RGDP (Real Gross Domestic Product, proxy for Economic Growth), LAFOR (Labor Force), DEXP (Defence Expenditure), GFCF (Gross Fixed Capital Formation) and FDI (Foreign Direct Investments) formed the model for the study as well as a strategic and political variable included as a dummy to capture the regime effect of both the military (16 years) and civilian (14 years) leadership in Nigeria within the study period. The Augmented Dickey- Fuller and Engle- Granger Co-integration Tests as well as the Granger Representation Theorem were employed to model the series. Both long and short run relationship among variables were established. The major finding of the study is that there exist a positive and significant relationship between defence expenditure and economic growth; As a result, the study recommended increased government spending on productive defence expenditure, adequate utilization of funds made to the defence sector and reduced spending on protective defence expenditure without wastage.
Keywords: Defence expenditure, Economic growth, Labor force, GFCF, FDI
