Impact of Government Spending on Small and Medium Scale Businesses in Nigeria
This paper examines the impact of public expenditure on the output and productivity of small and medium scale enterprises in Nigeria using annual time series data for the period of 1970 2015. The experiment was conducted using the specifications of the law as outlined in the public expenditure literature. Including others methods and models, first, we check for the time series properties of the valuables used by applying the ADF, PP and the KPSS test statistics, also, the Johansen's co integration test procedure as well as the autoregressive distributed lag (ARDL) bounds testing approach were employed. Result of the study revealed that: Generally, all the variables were found to be stationary at their first differences, except government expenditure which was stationary at level. The result also shows a long run unidirectional causality from SMEs output and productivity to public expenditure. However, in other instances, there was bidirectional causality between SMEs output and productivity and public expenditure. Indeed, it was found that while causality runs from SMEs output and productivity to public expenditure in the long run, short run changes in SMEs output and productivity was cause by changes in public expenditure. The conclusion from these results is that while there is a strong support for Wagner's postulation of a long run tendency for public expenditure to grow relative to national income in Nigeria over the period 1970 2015, public expenditure still remains a veritable short term instrument that can be used to spur economic growth and development in Nigeria.