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Government Expenditure and Sustainable Industrial Development in Nigeria

The development of the industrial sector remains a contentious issue in Nigeria’s economy. The urgency and role of government expenditure in the sustainable development of the Nigerian economy, particularly in terms of industrial development, has been directed towards a very short-term imperative that involves fiscal deficits through a mixture of reduced revenue and higher spending. The long-term issue that has the capacity for change that can be achieved in ways that promote growth rather than inhibit it has been negated. This research, therefore, examines the impact of Government expenditure and sustainable industrial development in Nigeria. This research adopted Johansen co-integration and vector error correction analysis via E-Views statistical software (version 10.0) for the period between 1981 and 2018, to determine the long-run impact of government expenditure on industrial development in Nigeria. It used time-series data extracted from CBN statistical bulletin (2018) and WDI (2018). This research adopts Wagner’s Law named after the German political economist Adolph Wagner (1835-1917), which best explains government expenditure and industrialization. This research study found out that government revenue is statistically insignificant but has a positive effect on industrial development; Manufacturing Value added as a proxy (MVA), a 100% change in GREV will bring about 28% changes in manufacturing output, capital expenditure is however statistically significant and negatively impacts industrial output, a change in CEXP will yield less than a proportional change in MVA by about 52%, recurrent expenditure positively affects industrial growth, although its influence is statistically insignificant, a 100% rise in REXP will cause about 41% increase in the development of the industrial sector. Also, a change in capital stock i.e. Gross Fixed Capital Formation (GFCF) will lead to a significant but inelastic and less than proportional change in MVA, thereby depicting inverse relationship. Based on the findings from this research the following recommendations were made: Effective allocations of government revenue, as well as the early release and approval of budget proposals, will have a meaningful effect on the industrial sector in Nigeria, increase in sustainable investment level alongside required equipment coupled with qualified personnel to properly manage these amenities will ensure the improvement of the industrial sector and finally, working incentives in form of tax incentives, promotion and salary increment should be regularly encouraged in the industrial sector in Nigeria.