# Introduction conomic development is said to be the sustained, concerted actions of public policy makers and communities that promote the standard of living and economic health of a particular area or nation. Economic development measures the expansion of a country's potential national output or potential real GNP; and the expansion of economic power to produce according to Ukwu (2004). This is a generally upheld view of most economists. However, how true is this assertion, is a thing of controversy that needed to be investigated. Without some kinds of economic development and growth, developing countries cannot extricate themselves from the quagmire of ancient poverty. It is imperative that, these countries usually pursue fiscal policy to achieve accelerated economic development. However, the question that readily comes to mind is that, can this assertion be true or applicable economic powers to produce goods and services, will our economy grow? This and other factors have to be investigated;hence, this research. The relationship between public expenditure and economic development has been a fertile ground for series of debate among scholars. Keynes (1936) argued that the solution to economic depression is to induce the firms to invest through some combination of variables such as the reduction in interest rates and government capital investment especially in the area of infrastructure. increased public expenditure promotes economic development. A number of prominent authors especially of the neoclassical school argue that increased public expenditure may slow down the aggregate performance of the economy because, by raising expenditure, government may have to increase taxes and/or go into borrowing. The higher income tax may discourage or may be a disincentive to additional work which in turn may reduce income and aggregate demand. In the same vein, high corporate tax leads to increase in production costs and reduce profitability of firms and their capital to incur investment expenditure. On the other hand, increased government borrowing to finance its expenditure, may compete and crowd-out private sector inducement and this will in turn reduce private investment in the economy. Sachs (2006) argues that among the developed countries, those with high rates of taxation and high social welfare spending perform better on most measures of economic performance compared with countries with, low rates of taxation and low social spending. Hayek (1989) however countered this argument by saying that high levels of government spending in addition to harming, does not in any way promote social welfare engendered fairness, economic equality and international competitiveness. This government recurrent expenditure increased to N3,689,148,100,000 Trillion and the total government capital expenditure increased to N1,108,377,000,000 Trillion (see appendix 1). The Gross Domestic Product (GDP) per capita of Nigeria expanded by 132% between 1960 and 1969 and further rose to a growth rate peak of 283% between 1970 and 1979 (CBN Statistical Bulletin 50 years special Anniversary Edition Dec. 2008). The high levels of inflation and unemployment rates resulted in fiscal imbalance between 1979 and 1983 with negative consequences on balance of payment. The level of increase in external loans further accelerated the debt burden and other problems which became so severe that restructuring of the economy was inevitable. Acomprehensive economic reform programme called the Structural Adjustment Programme (SAP) was therefore introduced in 1986. Within the SAP period i.e. between 1988 and 1997 the GDP responded to economic adjustment policies and grew at a positive rate of 4% (Onakaya et al, 2013). The real GDP growth measured by the Real Gross Domestic Product (RGDP) shows a growth rate of 7.9% in 2010 (CBN Annual Report page 114, 31 st Dec. 2010). The government total expenditure over the years which raises a critical question on its role in promoting economic growth and development shows the performance of the economy which is in a snail moving pace. Some authors contend that the link between public expenditure and economic growth is weak while others report varying degree of causality relationship in Nigeria (Onokaya et al, 2012). The question which arises therefore is what is the relative contribution of capital expenditure and recurrent expenditure to economic development in Nigeria? This work was therefore, aimed at investigating the impact of public expenditure (recurrent expenditure and capital expenditure) on economic development in Nigeria from 1970Nigeria from -2014. . This study therefore stands out to ascertain the validity of the statement that public expenditure has significant impact in inducing economic development in Nigeria. Specifically, this study sought to examine objectively the lethargic nature of Public (government) expenditure leading to slow economic development in Nigeria; as well as finding out theeffect of public investment expenditure on economic growth in Nigeria. Accordingly, We are to further concert efforts to find out the effect on economic development in Nigeria of public investment expenditure on human capital development. # II. # Review of Related Literature Economic development can be referred to as the quantitative and qualitative changes in the economy. Such actions can involve multiple areas including development of human capital, critical infrastructure, # Global Journal of Management and Business Research Volume XVII Issue III Version I Year ( ) regional competitiveness, social, health, safety, literacy, and other initiatives. Economic development differs from economic growth in thatwhereas economic development is a policy intervention endeavoured with aims of economic and social well-being of people, economic growth is a phenomenon of market productivity and rise in GDP. Consequently, as economist AmartyaSen points out that, "economic growth is one aspect of the process of economic development." # a) Model Specification The models adopted for this research are presented below to show the impact of capital government expenditure and recurrent government expenditure on gross domestic product in Nigeria as follows: GDP = F (GREX, GCEX,) ?????????..?Eq 1 GDP = ? 0 + ? 1 GREX + ? 2 GCEX + ? ?????... Eq 2 ? 0 >0, ? 1 >0, ? 2 >0 Where: GDP = Gross Domestic Product GREX= Government Recurrent Expenditure GCEX= Government Capital expenditure ? 0 = Constant intercept ? 1 and ? 2 = Slopes of the regressions(co-efficient of the variables) ? = Error term The model is estimated using the ordinary least square (OLS) method of analysis, as it is considered the best linear unbiased estimator. Also, since the data was increasingly large, we take the log function of the variables to reduce the variance. So that, we rewrite the new statistical linear model as: LOG(GDP) = ? 0 + ? 1 LOG(GREX) + LOG(GCEX)? 2 Eq.3 b) Theoretical Literature Review Public expenditure theory, traditionally, is explained by a general acceptance of the philosophy of laissez-faire and is a belief in the efficacy of free market mechanism. However, with the advent of welfare economics the role of the state has expanded especially in the area of infrastructural provision and theory of public expenditure which is attracting increasing attention. This tendency has been reinforced by the widening interest of economists in the problems of economic growth, planning, regional disparities, distributive justice and the like (Bhatia, 2002). The theory of public expenditure may be discussed in the context of increasing public expenditure, on different items like recurrent and capital expenditure. The two parts may also be conceived in terms of allocation of the economy's resources between providing public goods on the one hand and private goods on the other. # i. Theory of Increasing Public Expenditure There are two important and well-known theories of increasing public expenditure. The first is traced to Wagner (1890),while the second to Wiseman and Peacock (1979). Wagner revealed that there are inherent tendencies for the activities of different layers of governments such as central, state and local governments to increase both intensively and extensively. He maintained that there was a functional relationship between the growth of an economy and government activities with the result that the governmental sector grows faster than the economy. However Nitti (1903) not only supported Wagner's thesis but also concluded with empirical evidence that it was equally applicable to several other governments which differed widely from each other's. For all kinds of governments, irrespective of their levels (be it the central or state or local government), has its intentions (peaceful or warlike), and size, etc., had exhibited the same tendency of increasing public expenditure. On the other hand, Wiseman and in their study of public expenditure in UK for the period 1890-1955 revealed that public expenditure does not increase in a smooth and continuous manner, but in jerks or step like fashion. At times, some social or other disturbance takes place creating a need for increased public expenditure which the existing public revenue cannot meet. # ii. Peacock and Wiseman's Theory of Expenditure Peacock and Wiseman (1961)'s study is probably one of the best known analyses of the time pattern of public expenditures. They founded their analyses upon a political theory of public determination namely that governments like to spend more money and citizens do not like to pay taxes, and that government need to pay some attention to the wishes of their citizens. The duo saw taxation as setting a constraint on government expenditure. As the economy and thus incomes grew, tax revenue at constant tax rate would rise, thereby enabling public expenditure to show a gradual upward trend even though within the economy there might be a divergence between what people regarded as being desirable level of public expenditure and the desirable level of taxation. However, during periods of social upheaval, this gradual upward trend in public expenditure would be distorted. These periods would coincide with war, famine or some large-scale social disaster, which would require a rapid increase in public expenditures; and the government would be forced to raise taxation levies. The raising of taxation levels would be regarded as acceptable to the people during the period of crisis. referred to this as the "displacement effect". Public expenditure is displaced upwards and for the period of the crisis displaced private for public expenditure does not however fall to its original level. No nation has such large taxable capacity to fund a war. Countries therefore borrow to fund a war which debt charges have to be funded after the event. Another effect that they thought might operate was the "imperfection effect" thus they suggested that a rise or improvement from the people created awareness of social problems during the period of upheaval. The government therefore, expands its scope of services to improve these social conditions and because peoples' perception to tolerable levels of taxation does not return to its former level, the government is able to finance these higher levels of expenditures originating in the expanded scope of government and debt charges. # iii. Ernest Engel's Theory of Public Expenditure Ernest Engel a German economist wrote almost the same time as Adolph Wagner in the 19 th century. Engel pointed out that the composition of the consumer budget changes as family income increases. A smaller share comes to be spent on certain goods such as work clothing and larger share on others, such as for coats, expensive jewelries etc.As average income increases, smaller charges in the consumption pattern for the economy may tend to occur also. At the earlier stages of national development, there is need for overhead capital expenditure on such things as roads, harbours, power installations, pipeborne water etc. But as the economy develops, one would expect the public share in capital formation to decline over time. Individual expenditure pattern is thus compared to national expenditure and Engel findings is referred to as the declining portion of outlays on foods. # iv. Wagner Law of Increasing State Activities Thus, Wagner was emphasizing long-term trend rather than short-term changes in public expenditure. He was not concerned with the mechanism of increase in public expenditure since such is based on historical experience, while the precise quantitative relationship between the extent of increase in public expenditure and time taken by it was not fixed; hence, could not be used to predict its rate of increase in the future. In consonant with the Wagner's law of the state activities in future, the state expenditure will increase at a rate slower than the national income though, it had increase at a faster rate in the past. Thus, in the initial stage of economic growth, the state finds out that it has to expand its activities quite fast in several fields like education, health, civil amenities, transport, communications, and so on. But when the initial deficiency is removed, then the increase in state activities many be slowed down. The factors, which contribute to the tendency of increasing public expenditure, relatesto a growing role of the state which is said to be ever-increasing socio-economic complexities of modern society, leading to economic development at the tail end. However, the rate of development also rests on the kind of expenditure made by both government and the private sector. # c) The Second National Development Plan The Second National Development plan (1970)(1971)(1972)(1973)(1974) accorded a leading role of development to government just as it considered public enterprise as crucial to growth and self-reliance due to capital scarcity, structural defects in the private sector and perceived danger of foreign dominance of the private sector. The third National Development plan (1975)(1976)(1977)(1978)(1979)(1980) advocated some shift in resources allocation in favour of rural areas, which were said to have benefited little from the economic growth of 1970's. Thus, small farmers and the rural population were expected to benefit from public expenditure. However, against the background of the austere fiscal outlook of the government, under the Third National Plan (1981)(1982)(1983)(1984)(1985), the role of fiscal policy was viewed mainly as the generation of revenue through increased tax effort and the control of public spending. The structural adjustment programmed (SAP) introduced in July 1986 under the Babangida's administration, recognized that the financial resources for public expenditure for the rest of the1980s and beyond were likely to be less than was previously envisaged, given the uncertainty in the oil market and substantial debt repayment falling due, there was need to curtail government expenditure, especially those involving foreign exchange. # i. The Nature and Constituents of Public Expenditure Public expenditures refer to the expenses that government incurs for its own maintenance, for the society and the economy as a whole (Weil, 2009). Public spending reflects the policy choices of government. Once government has decided upon the type and quantity of goods and services to provide, government spending represents the cost of carrying out these policies (Weil, 2009). The rationale behind the need for expenditure is associated with the existence of externality or market failures; there is no reason to assume that additional public sector investments would be more productive than the private sector investments (Tanzi, 1997). Government spending on public services has profound effect on the citizens' standard of living and opportunities. Government spending on public services has the objectives of giving the citizens a chance to realize their fool potential (through education, training and work), building an inclusive and fair society and strengthening a competitive economy (Lin, 1994). Thus the objectives of public expenditure encompasses both equity and efficiency elements. It is argued by some economists that efficiency improvement must be achieved at the expense of equity. However, inefficiency in the provision of public services has shown that opportunities for improved equity are lost because of wasteful use of resources (Bailey, 2002). This point is exacerbated to the point that both the provision and financing of public services crowds out the private sector and leads to reduced economic growth. Lower economic growth results to fewer resources being available for the pursuance of social programmes. Public expenditure can be classified as functional (sectorial) categories of expenditure. Sectorial classification can further be decomposed into recurrent and capital expenditures. On the other hand, functional or sectorial expenditure include general public service, defense, public order and safety, education, health, agriculture, manufacturing and construction, mining and quarrying, water supply, transport and communication, electricity, environmental protection etc (Akrani, 2011;IMF, 2001;Heller and Diamond, 1990). # ii. Public Expenditure Growth The classical economists believe in the doctrine of non-state intervention in the economy and selfcorrecting mechanism of an economic system. Despite this believe, it is observed that public expenditures have risen tremendously in absolute terms over the years, indicating state expanding roles or activities in the economy. Even after making allowances for population and price increase, it is observed that public expenditures at all levels of government rose over a long period of time (Musgrave, 1889: Bailey 2002. This means that the classical belief in the doctrine of the state non-intervention and self-correcting mechanism of an economic system has not hold in practice, hence increase in government expenditures in all countries. There are some macro models of public expenditure that help to explain how government expenditure has expanded over a long term period (Brown and Jackson: 1996). The first model can be described as the development models of public expenditure growth; and the second model is based on Wagner's law of expanding state activities; while the third model is referred to as Peacock and Wiseman's (1961) model of public expenditure growth. Development models of public expenditure growth can be represented by the works of Musgrave (1919) and Rostow, (1960). Their views are generalizations gathered from examination of a number of different cases (histories) of developed economies. In the early stages of economic growth and development, public sector investment as a proportion of the total investment of the economy is found to be high since public capital formation is of particular importance at this stage. The public sector is therefore, seen to provide social infrastructure overhead such as roads, transportation systems, sanitation systems, law and order, health and education, provision of social amenities and other investments. It is argued that this public sector expenditure is necessary to increase productivity and stimulate the economy for a take-off into the middle stages of economic and social development. Up to the middle stage of growth, the government continues to supply investment goods but this time public investment is complementary to the growth in private investment. During all the stages of development, market failure exist which can frustrate the push towards maturity hence the need for increase in government involvement (spending) in order to deal with this market failure. Musgrave (1959) argued that, over the development period, total investment as a proportion of GNP increases the relative share of public investment falls. This is because as the economy develops, a larger flow of savings becomes available; the capital stock in the private industry and agriculture must be built up. The basic stock of social overhead capital, similar to public utilities becomes a declining share of net capital formation. Rostow (1960) argued that once the economy reaches the maturity stage, the mix of public expenditures will shift from expenditures on infrastructure to increasing expenditure on education, health and welfare services. In the mass consumption stage, income maintenance programmes, and policies designed to redistribute welfare, will grow significantly relative to other items of public expenditure and also relative to GNP. Wagner (1890) posit that the law of rising public expenditure by analyzing trends in the growth of public expenditure and the size of public sector in many countries of the world. Wagner's law of public expenditure postulates that: (i) The extension of the functions of the state leads to increase in public expenditure on administration and regulation of the economy; (ii) The development of modern industrial society would give rise to increasing political pressure for social progress and calls for increasing allowance for social consideration in the conduct of industry and; (iii) The rise in public expenditure will be more than proportional increase in the national income and will thus result in a relative expansion of the public sector. The analysis of Peacock and Wiseman has established the displacement effect. They found that public expenditure increases during a war or a period of social crisis. When the war ends or the crisis is resolved, public expenditure falls, but not to the original level at the start of the emergency, with the result that growth in public expenditure occurs in stages. The increase in war-related expenditures displaces both the government and private expenditures. This means that, while total public expenditures rise dramatically, the increase is less than the increase in war related expenditure. There have been criticisms of Peacock and Wiseman model which often times have asked the question -what happens to the increase in government expenditure in the post war period? There has been no long run displacement effect even when the private civilianmakes expenditures in the post war period which did return to their original growth path or in the case where there is only a temporal increase in post war civilian public expenditures until the old trend line is reached. There is evidence that after deferred civilian public spending has taken place following the war, public outlays return to the pre-war trend level (Brukhead and Mrinal, 1979). Beyond these macro models discussed above, demographic change has been cited as a factor that contributes to the growth of public expenditure. As population increases, it is expected that there has to be a corresponding level of activity produced in the public sector to serve the larger population. On the part of government, expenditure pattern has to fall in line with the demographic trends such as changes in the structure of the population notably the age and sex as well as the geographical distribution. # iii. The Impact of Government Spending on Economic Growth and Development The classical economists are known to favour the doctrine of laissez-faire in the workings of the economy. Smith (1776) argued that governments are always and without exception the greatest spend thrifts of the society as they spend public money. He believes that individuals, acting in self-interest, will promote public good under the guidance of the invisible hand of the market forces, maintaining that people should be left unhindered to pursue their best interests and in the process they would benefit the society. This implies minimal level of government expenditure for accelerated economic growth. The question is will the minimal government expenditure bring about accelerated economic growth instead of torpedoing the growth? Unemploymentto the classical economists is a theoretical impossibility, which not only proved possible, but became a major international problem as the great depression of the 1930s has shown. The work of Keynes (1936) had a profound and pervasive influence on economists and governments for many years. He argued that government should use public expenditure as a tool of economic policy to manage the national economy so as to counteract unemployment. This requires an expansive fiscal policy, in which government would deliberately aim at a budget deficit by spending more money (through borrowing) than it raised in taxation. The multiplier effect of public expenditure would counteract unemployment. By increasing public expenditure, government was seen to be doing something about unemployment while the public was getting something (additional state benefits) for nothing, as it appeared, since there was no increase in taxation. Thus, such fiscal policy was attractive to governments since it provides a rationale for spending more money. This Government spending accompanied by deficit financing to promote economic recovery concept known as"Pimp Priming" did not mean that government should be big, rather the Keynesian theory asserts that government spending, especially deficit spending could provide short-term stimulus to help the economy from a depression or recession. The Keynesians even argued that government should be ready to reduce spending once the economy recovered in order to prevent inflation that might result from the economic growth process. This means that excessive spending will retard economic growth as inflation sets in. The guidance as to how government will spend to bring positive impact on economic growth was provided by Krueger (1990), in which he listed the following conditions. First, any decision on government spending can be undertaken only when there is a specified set of procedures for deciding what fits within the scope of the outlined policy and also an administrative apparatus for implementation of the policy. He went on to say that even when it appears that government action would actually be effective; there is something of a presumption in favour of policies and programmes requiring a minimum administrative and bureaucratic input. Furthermore, policies directly controlling private activity are likely to be less efficacious in terms of achieving their objectives than policies that provide incentives for individuals to undertake the activities which are deemed desirable. Hence, a presumption exists in favour of choosing a mechanism which provides least scope for rent-seeking. Finally, there is a question of transparency when the costs of a policy are obscured. Special interests in the private sector and government have a greater opportunity to use those policies for their own advantage without the consent of voters. Thus, choosing the policy with lower information costs is usually preferable and this will eventually lead to retardness in economic growth. # d) Empirical Literature A number of studies have been carried out empirically to examine the relationship between government spending and economic growth. Vedder and Gallaway (1998), discussing the relationship between government spending and economic growth, maintain that the output enhancing futures of government spending dominates when government taxes is very small. At a low level, the productive effects of public spending are likely to exceed the social costs of raising funds. As government expenditure grows, however, the law of diminishing returns begins to operate andbeyond some point, further expansion of government spending no longer lead to output expansion, as the growth reducing aspects of government grow larger and the growth-enhancing aspects of government diminish. Further expansion of government spending contributes to economic stagnation and decline. These negative effects may be more glaring where financing relies heavily on more distortionary taxes (direct taxes) and where public expenditure focuses on unproductive activities. They further buttress their argument, by explaining that while the construction of roads and initial assets output expands, the construction of secondary roads and upgrading primary roads start to have less added positive impact per dollar spent. Moreover, the taxes and/or borrowing levied to finance higher government expenditure impose increasing burdens, (low tax rates become higher). New taxes such as income taxes are added to low consumption levels, with increasing adverse effect on human economic behaviour. Tariffs are raised, thwarting trade. Consequently, new government spending no longer enhances economic growth. Mitchell (2005) pointed out a number of reasons that makes government spending have negative impact on economic growth. First, the extraction cost. All the options used to finance government spending have adverse consequences. High taxes on work; saving and investment discourage productive behaviour. Borrowing consumes capital that otherwise be available for private investment and may lead to higher interest rates. Inflation debases a nation's currency, resulting in widespread economic distortions. Second, the rate of economic growth may be adversely affected by the transfer of resources from use in manufacturing of the private sector, to the public sector for provision of social services. This is referred to as displacement cost (where government spending displaces private sector activities). This dampens economic growth since the market forces of demand and supply guide allocation of resources in private sector, and whereas political forces dominate when politicians and bureaucrats decide how money is spent. The political process is much less dynamic than the market with less incentive for increased productivity. Third, there is negative multiplier cost as government spending finances harmful intervention. Portion of the federal budget are used to financing activities that generate negative effect on economic activities. For example, many regulatory agencies have comparatively small budgets but they impose large costs on the economic productive sector. Fourth, creative discovery enhances economic growth. Because of competition and the desire to increase income and wealth, individuals and entities in the private sector constantly search for new options and opportunities. Government programmes are inherently inflexible, both because of centralization and because of bureaucracy -thus causing stagnation. Finally, government spending involves inefficiency. Government directly provides services and activities such as education, postal services, airports, ports etc.However, there is evidence that private sector could provide these important services at higher quality and at lower cost. If public sector has less scope for productivity improvement than the private sector and yet to grow at the latter's expense due to under linking of public expenditure, then the productive potential of the economy is reduced. However, based on the above argument, Mitchell, (2005) warned that small government that fails to provide legal system, a stable monetary regime and other core functions effectively and efficiently will most likely not promote economic growth. Therefore, a small government does not by itself promote economic growth. Ram (1986) commented on the impact of government size on economic growth. One point of view suggests that a larger government size is likely to be detrimental to efficiency and economic growth because government operations are conducted inefficiently. The regulatory process imposes excessive burdens and costs on the economic system and many of the government fiscal and monetary policies tend to distort economic incentives and lower the productivity of the system. At the other extreme, there are other points of views that assigned to the government a critical role in the process of economic growth, and could argue that a larger government size is likely to be a powerful engine of economic development. The latter point of view is based on the role of the government in harmonizing conflicts between private and social interests, prevention of exploitation of the country by foreigners and securing an increase in productive investment and providing a socially optimal direction for growth and development. Another approach in explaining and analyzing the impact of government spending on economic growth is made by classifying government spending into productive and unproductive classes. maintains that productive government spending would include the resources devoted to property right enforcements as well as activities that enter directly into production function. It is this productive role that creates a potentially positive linkage between government and economic growth. For example, if government expenditure is held fixed, an increase in the average marginal tax rate or an exogenous worsening of property rights would tend to lower the growth or saving rates. An increase in the share of nonproductive government expenditure, (consumption, for example) lowers the growth and savings rates. These effects arise because higher nonproductive government expenditure has no direct effect on private sector productivity, but does lead to higher income tax rate. Since individuals retain a smaller fraction of their returns from investment, they have less incentive to invest and thus the economy tends to grow at a lower rate. subscribes to the fact that there are quite high returns to increase public spending when it is starting from a low base, without the imposition of rule of law or adequate health and education. According to the World Bank Development Report (1988), the expanded role of public sector carries with it risks and opportunities. The risks come from the ineffective use of public resources and from the over extension of government into areas that are better left to private markets. In this case much of government interventions may be inappropriate because the bureaucracy is ill equipped to intervene. In the market system of efficient civil services, high market failures, and lower distortionary effect of tax, greater government involvement may be appropriate. It is the task of the public finance to balance the opportunities and risks, and thus improve the quality of government. The important aspects of public finance within which pragmatic policies should be pursued are the management of public deficits, revenue mobilization, and allocation of public spending and decentralization of functions. # e) Structure of Government Expenditure (Capital versus Recurrent Expenditure) Capital expenditure is broadly defined as an outlay on acquisition of fixed assets to enhance production of goods and services. Such outlay include spending on land development, construction of power plants, buildings, dams, roads, schools, health, and purchase of plants and equipment . Recurrent expenditure comprises expenditure items which are recurring in the process of delivering government economic and social services such as wages, subsidies, operation and maintenance services, pension and debt services are among the major components of recurrent expenditure (CBN Statistical Bulletin vol.21 Dec. 2010). In 1976, General Olusegun Obasanjo emphasized the policy of direct state participation in business activities in the economy. This led to increase in investment and capital projects which increased capital expenditure. From1975 to 1983, capital expenditure as percentage of total government expenditure increased more than recurrent expenditure. The democratically elected government of Shehu Shagari in 1979carried out public expenditures on Federal Capital Territory development, on housing scheme and River Basin development around the country (Ukwu 2004). All expenditures within the regime up to 1983 when the Shagari administration was toppled in a military coup in December, 1983 increased rapidly. # III. # Method of Study This study makes use of time series data from 1970 to 2014, using data collected for analysis since there was a perceivedcausal relationship between government expenditure (Recurrent and Capital) and economic development in Nigeria. We are guided by the following research questions and/or hypotheses as follows: Does public capital expenditure exert any significant impact on economic development in Nigeria?Has government investments spending on economic services contributed to economic development in Nigeria? Does government investment on social community services influenced economic development?Does government transfer expenditure in Nigeria impact significantly on economic development in Nigeria and at what pace? These encompassing questions has led the formulation of some hypotheses such as -Capital Investment Spending has no significant effect on economic development in Nigeria; Public Recurrent expenditure has no significant impact or influence on economic development in Nigeria. The dependent variable is Gross Domestic Product (GDP) while the independent variables are Government Recurrent Expenditure (GREX) and Government Capital Expenditure (GCEX). The study is an empirical study design to show how government expenditure, which is classified into Government Recurrent Expenditure and Government Capital Expenditure impact on economic development of Nigeria within the period under review.The characteristics of this study on the effect of government (public) expenditure was on Administration, Economic Services, Social and Community Services and Transfers in the development of the economy. Variables that enter the model are gross domestic product (GDP) as explained variable, and government recurrent and capital expenditures on Administration (GREXAD and GCEXAD), Economic Services (GREXES and GCEXES), Social and Community Services (GREXSCS and GREXSCS) and Transfers (GREXTR and GCXETR), as explanatory variables. The explained variable (GDP) is the dependent variable while the explanatory variable is the independent variable which is classified into two groups: Government Recurrent Expenditure (GREXAD, GREXES, GREXSCS, GREXTR) and Government Capital Expenditure (GCEXAD, GCEXES, GCEXSCS, GCEXTR) are as shown on table 1. The regression output includes other relevant statistics that enhance further analysis and evaluation. Estimates of model coefficients are evaluated for partial and joint significance of their effects on economic development. Basis of evaluation are the t-and F statistics respectively at 0.05 level of significance and relevant degrees of freedom. Explanatory power of the model, as a measure of goodness of fit, is determined using the coefficient of determination (R-Square and adjusted R-Square). These statistics enhance insight into the extent to which the various government expenditures explain economic development in Nigeria for the period under review. Empirical econometric approach being adopted was toanalysing data considered relevant components of government expenditure and economic development. # a) Data Analysis The values of Gross domestic product maintained an increasing trend during the period under study. In the year 1970, GDP was N5, 281,100,000 and it rose to N267,550,000,000 in 1990. It The estimate of a 0 is -127832.8, meaning that if the independent variables are zero, the dependent variable will autonomously become -127832.8. The estimate of a 1 is 0.832; meaning that there is a direct relationship between CGEXP and GDP. It also implies that a unit change in CGEXP will lead to 0.832 changes in GDP. The estimate of a 2 is 11.138, means that there is a positive relationship between RGEXP and GDP. This implies that a unit change in RGEXP will lead to 11.138 increases in GDP. The t-ratio for the estimate of a 0 is -0.358. At 5% level of significance with a degree of freedom of 31, (where degree of freedom is N -2 = 33 -2 = 31); the critical t-ratio from the statistical table is 2.021. The empirical t-ratio is lesser than the critical t-ratio (i.e. -0.358 < 2.021). This implies that the estimate of a 0 is not statistically significant. The t-ratio for the estimate of a 1 is 0.449. At 5% level of significance with a degree of freedom of 31, the critical t-ratio from the statistical table is 2.021. The empirical t-ratio is lesser than the critical t-ratio (i.e. 0.449 < 2.021). This implies that the estimate of a 1 is not statistically significant, meaning that capital government expenditure has no significant impact on economic growth. The t-ratio for the estimate of a 2 is 18.790. At 5% level of significance with a degree of freedom of 31, the critical t-ratio from the statistical table is 2.021. The empirical t-ratio is less than the critical t-ratio (i.e. 18.790 > 2.021). This implies that the estimate of a 2 is statistically significant, meaning recurrent government expenditure has significant impact on economic growth. The coefficient of determination (R 2 ) is 0.9883. This means that the independent variables were able to explain 98.83% of the total variations in the dependent variable, while the 1.17% unexplained were due to the stochastically or error term. The adjusted coefficient of determination (R 2 ) is 0.9876. This implies that the explanatory variables were able to explain 98.76% of the total variation in the dependent variable while the 1.24% unexplained was captured by the error term after taking cognizance of the degree of freedom. The value of F-statistics is 1276.797. At 5% level of significance with a degree of freedom of v 1 = 1, v 2 = 31, (where degree of freedom, v 1 = K -1 = 2 -1 =1, v 2 = N -K = 33 -2 = 31). The critical f-ratio from the statistical table is 4.08. The empirical f-ratio is greater than the critical f-ratio (i.e. 1276.797 > 4.08). This implies that the coefficient of determination is statistically significant; hence we accept the alternative hypothesis that states; government expenditure has significant impact on economic growth in Nigeria. The value for Durbin Watson statistics is 1.132. At 5% level of significance, with thirty three observations, and two independent variables, the upper and lower limits of Durbin Watson from the statistical table are d U = 1.577, d L = 1.321. These satisfies the relation 0< DW < d l , that is, 0 < 1.132 < 1.321. This implies that there is presence of positive autocorrelation. # IV. Conclusion and Recommendations a) Summary We have empirically examined the impact of government expenditure on economic development in Nigeria using secondary data which were obtained from the Central bank of Nigeria Statistical Bulletins for a period of forty-five years (i.e. 1970-2014). The result of the regression analysis in the first model reveals that government recurrent expenditure (GREX) and government capital (GCEX) expenditure were positively related to gross domestic product (GDP) as government expenditure has significant impact on economic development in Nigeria. The two explanatory variables GREX and GCEX being regressed have a value of 0.9942 being able to explain 99.42% of the total variation in gross domestic product after taking intocognizance the degree of freedom. It is our conclusion that government expenditure has significant impact on the economic development in Nigeria.Government consumption expenditure was found to have depression on economic growth in Nigeria which results corroborated the findings of who hypothesizes that unproductive government expenditure is liable to depress economic development. Therefore, government should reduce its recurrent expenditure on wasteful ventures in order to stimulate economic development and growth. The study was alsoable to establish that government capital expenditure stimulates economic development in Nigeria. This finding is in line with the theoretical postulation that government productive expenditure promotes economic development. So, the current poor performance of Nigeria's economy is attributable to improper distribution of government expenditure to areas of needs and not considering the direction of economic indicators. The followings are our recommendations based on the conclusions: © 2017 Global Journals Inc. (US) 1 © 2017 Global Journals Inc. (US) ( ) 2017 © 2017 Global Journals Inc. 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