GOVERNMENT SIZE AND ECONOMIC GROWTH IN NIGERIA: CAN THERE BE TOO MUCH OF A GOOD THING?

Abstract

Regardless of the several studies, there is a dearth of studies assessing the effects of 
government size using Armey’s curve on economic growth in Nigeria. Hence, this study 
examines the effects of government size on economic growth in Nigeria from 1993 to 
2022. The study employed time series techniques. Different combinations of 13 
explanatory variables feature in the estimated equations. These 13 explanatory variables 
comprise 5 conditioning variables and 8 explanatory variables of primary interest 
because they serve as government expenditure measures. Drawing on data from CBN, 
IMF, and World Bank, the Autoregressive Distributed Lag (ARDL) estimation method 
was used in estimating all the models after ensuring the validity of the estimates through 
suitable diagnostic tests. The study found that government expenditure has a positive and 
significant effect on economic growth and any addition beyond the required threshold 
values of 14.089 per cent will retard growth. Accordingly, this study recommended that 
policymakers maintain a threshold level and encourage capital expenditure to foster 
economic growth in Nigeria.