Government Expenditure and Manufacturing Sector Performance in Nigeria: A Co-integration Approach

This study examined the relationship between Government expenditure and Manufacturing sector performance in Nigeria from 1980 to 2024. Major variables engaged in the study are manufacturing sector output, exchange rate, government capital expenditure and government recurrent expenditure. Data were sourced from the Central Bank of Nigeria (CBN) Statistical bulletin and the analysis employed the Descriptive test, Augmented Dickey Fuller (ADF), Unit root test, Co-integration and the Error correction mechanism model to ensure data stationarity of short-run connections. The Error correction Mechanism (ECM) result of -0.764674 or 76 % indicate the speed of adjustment from the long run to its short dynamics. Results also discovered that R² is 0.549022 (54 %) meaning that the independent variables explains 54 % of the variations in the dependent variable. The study therefore conclude that government capital expenditure, recurrent expenditure and exchange rate have significant effect on manufacturing output. Built on the findings, the ensuing recommendations emphasized that authorities should continue to invest in infrastructure and projects that stimulate economic activities in the manufacturing sector. Again, policy makers should prudently manage and scrutinize recurrent spending. Finally, government should consider implementing policies that gives incentives to workers and enhance their motivation through non-monetary benefits which can contribute to improved productivity.