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DEFENCE SPENDING AND ECONOMIC GROWTH, 1970-2015: Empirical Evidence

DEFENCE SPENDING AND ECONOMIC GROWTH, 1970-2015: Empirical Evidence

 

Abstract: This paper investigates the relationship between defence expenditure and economic growth in Nigeria 1970-2015 proxied by gross domestic product (GDP), social sector expenditure (SSE) and gross capital formation (GCF). Defence expenditure being a major concern to any economy world has become a major tool in accessing the level of economic growth, particularly in Nigeria where defence expenditure is higher than that of education and capital expenditure. The result indicated that the coefficient of interaction between social sector expenditures (SSE) and defence expenditure in the long run is negative and significant, given the coefficient of about -0.09 with corresponding p-values of 0.0372, which is less than 5% critical value. The implication of this is that the interaction of DEXP with SSE produced significant effect on the national output, GDP. It crowded out investment in the social sector, such as education and healthcare in the long run. In this case, the price of insecurity is the dearth of infrastructure. Based on the findings, the paper recommended government should reduce expenditures on the military to discourage the crowding out of funds for local investments.

JEL Classification: E62, H56, O47

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