Federal Public Spending and Economic Growth: The Case of Two Periods

Abstract: This study examines the impact of federal public spending on Nigeria’s economic growth across two distinct periods—one marked by political instability (1982–1999) and the other by political stability (2000–2011). Drawing from economic theories such as Keynesian economics and endogenous growth theory, the study investigates how government stability influences the effectiveness of public expenditure. Using an ex-post facto research design, secondary data from the Central Bank of Nigeria and the National Bureau of Statistics were analyzed through descriptive statistics, correlation, and regression analyses. Findings indicate that during periods of political instability, federal public spending was often misallocated, leading to inefficiencies and weaker economic growth. Conversely, stable governance fostered more effective fiscal policies, leading to stronger economic performance. Statistical analyses revealed a stronger positive correlation between public spending and economic growth in stable periods (r = 0.85) compared to unstable periods (r = 0.42). Regression results further confirmed the significance of federal spending in driving economic growth under stable regimes (β1 = 0.78, p < 0.01) but showed an insignificant impact during unstable periods (β1 = 0.31, p > 0.05). The study underscores the critical role of political stability in optimizing the effectiveness of government expenditure. It recommends strengthening governance institutions, improving policy consistency, and prioritizing public spending on productive sectors to enhance economic resilience. These insights provide valuable guidance for policymakers and economists seeking to maximize the developmental impact of fiscal policies in politically volatile environments.