An Analysis of the Relationship between Public Spending Components and Private investments in Nigeria

Abstract

This paper examined the relationship between components of public spending and private investments in Nigeria for the period 1981 to 2010. Utilizing an error correction modeling procedure, the study revealed that components of public spending have different impact on private investment both in the long run and the short run. Specifically, recurrent and government final consumption expenditure had positive (crowd-in) effect on private investment while capital expenditure had negative (crowd-out) effect on private investment. Thus, the study recommended that greater emphasis should be placed on capital expenditure.