International Journal of Research and Scientific Innovation (IJRSI) |Volume IX, Issue I, January 2022|ISSN 2321-2705 www.rsisinternational.org Page 138 Government Expenditure and Performance of Selected Macroeconomic Variables in Nigeria (1981 – 2018) Nnamocha, P.N. (PhD) 1 , Anyanwu, Austin Chinenye (PhD) 2 1 Dept of Economics, Imo State University, Owerri, Nigeria 2 President/CEO, Gulftek Microfinance Cooperative Society Ltd, Owerri, Nigeria Abstract: This research work studied government expenditure and performance of selected macroeconomic variables (RGDP, Unemployment rate and Inflation Rate) in Nigeria from 1981 to 2018. The study made use of annual data sourced from the Central Bank of Nigeria Statistical Bulletin (2018 edition). Three models were formulated using government expenditure which was disaggregated into two components; government capital expenditure and government recurrent expenditure as independent variables for each of the selected macroeconomic variables, while economic growth (proxied by RGDP), inflation rate and unemployment rate were the dependent variables in each of the three models. Error Correction model was used in analysing the data. The findings showed that government capital expenditure had positive impact on economic growth (proxied by RGDP), and negative impact on inflation rate and unemployment rate. On the other hand, government recurrent expenditure had positive relationship with economic growth, unemployment and inflation rate. The study concluded that government expenditure has a significant relationship with the selected macro-economic growth variables i.e. real GDP, unemployment rate and inflation rate in Nigeria. Based on these findings, the study recommended that government capital expenditure being the engine of industrial development should be increased in order to build up or increase the productive capacity in the country. Keywords: Government Expenditure, Unemployment Rate, Inflation Rate, Economic growth, Error Correction Model. I. INTRODUCTION overnment spending is a key policy instrument and occupies a strategic position in all the economies of the world. It stimulates economic activities needed to promote the well-being of its citizens and no economy that exists without incurring government spending. Nigeria, like most developing economies in the world, has witnessed a continuous increase in government expenditure over the years, both in the recurrent and the capital expenditure. This could be attributed to huge receipts from the production and sale of crude oil and the increased demand for public goods like roads, education and health facilities, external and internal security given an ever increasing population. However, the rising government expenditure is yet to translate to commensurate growth and development and improvement in the performance of key macroeconomic indicators. It is of great concern that government expenditure seems not to have shown the same level of economic growth in Nigeria. Dikeogu, et al (2016), opined that the poor performance of government expenditure in advancing the growth of the Nigerian economy since independence has led to the debate on the effectiveness of the public sector in the macroeconomic management in Nigeria. Adegboye (2012) further argued that the debate on government expenditure in Nigeria like in most other less developed countries has also focused on its effectiveness in business cycle stabilization as a fundamental aspect as well as on the output growth outcomes. Ezeabasili (2013) on his part stated that the management of government expenditure in Nigeria since independence has not been able to deliver the anticipated macroeconomic stability and growth. A detailed analysis of the trend of the relevant economic variables shows that the country is still battling with fluctuating economic imbalances which is can be seen in the inconsistent growth rates, illiteracy, high level of inflation, unemployment and poverty amongst others. According to Okoro (2013), between 1981 and 1990, while the GDP growth rate was decreasing (57.15 percent down to 2.87 percent), government expenditure growth rate was increasing (23.2 percent to 41.24 percent). Thus, the two periods had an inverse relationship between them. On the contrary, it is revealed that the growth rate of government expenditure in 2000 and 2010 was 15.53 percent and 2.15 percent respectively, while GDP growth rate witnessed within the same period 8.79 percent and 1.54 percent respectively. Thus, the growth rate of government expenditure was higher than GDP growth in the same period. The business day Newspaper of Tuesday 14 February, 2012, reported that the percentage of Nigerians living in abject poverty rose to 60.9 percent in 2012 as compared to 54.7 percent in 2004 and Nigeria ranks among the poorest countries in the world (Okoro, 2013). While it is expected that the growth in government expenditure in Nigeria over the years will also drive improvement in economic growth, reduce the inflation rate and unemployment rate in Nigeria, the story has been quite different. Iyeli (2012) in supporting these statistics argued that the Nigeria economy is yet to arrive on the path of sound growth G