IMPACT OF GOVERNMENT EXPENDITURE ON INFLATION RATE IN NIGERIA A DISAGGREGATED ANALYSIS

Abstract

This study examined the impact government expenditure on inflation rate in Nigeria from 1986 to 2021. The Autoregressive distributed lag (ARDL) model was used to analysze time series data from the statistical bulletin. The results showed that government expenditures on education, health, transports and communications, and pensions and gratuities had significant positive influence on inflation rate in both the short-run and the long-run. In contrast, the results indicated that government spending on agriculture, and roads and constructions exerted positive and significant impact on inflation rate in the short-run but inconsequential in the long-run. On the basis of the findings, the following recommendations were made among others: that government should embrace fiscal discipline in its expenditures by performing quality health service delivery evaluation in the health sector via constitution of committee of inquiry. In so doing, wastage expenditures on medical items can be checkmated and all items acquired utilized for quality health service delivery in the sector; and hence, lower inflation. More so, government should monitor fiscal spending on education through regular visitation to schools and evaluation of performance to ensure that education spending is properly utilized by management authorities in the education sector.