Defense expenditure and economic growth: The Nigerian Experience: 1977-2006

Abstract

The study presents empirical evidence on the relationship between the level of economic growth and defense expenditures in the case of Nigeria from the  period of 1977 to 2006. The study employed the supply model based on the production function proposed in Feder(1983) as extended by Biswas and Ram(1986).It further explore the use of unit root tests and found that the variables of capital stock, labor stock, defense expenditure are all stationary at the first difference except for labor stock which was stationary at the first level. The result of the Granger causality test shows that there is a unidirectional causality running from economic growth to defense spending. This study suggests that for Nigeria, a policy of increasing the defense budget to promote economic development growth might be inappropriate, but that same funds channeled towards other governmental program.

KEYWORDS: Defense Spending, Aggregate Output, Stationarity Test, Causality Test, Feder-Ram model