A Vector Error Correction Modeling of Security Spending and Economic Growth in Nigeria

Abstract

The study has been on the impact of security expenditure on the level of economic growth in Nigeria. Using data covering the period between 1980 and 2010, the ECM result shows that the expenditure on defence has a negative impact on the level of economic growth. An indication of flawed expenditure budgeting and implementation in the defence sector. Expenditure on internal security played important role in generating the desired level of economic growth in Nigeria. The low elasticity indicates that the significance was below expectations. The result of the variance decomposition shows that the shocks to expenditure on defense did not significantly explain the changes in the level of economic growth in Nigeria. Expenditure on internal security however played a role in influencing the level of economic growth in Nigeria. The result of the Johansen cointegration test shows a long run relationship among the variables and the error correction result shows a satisfactory speed of adjustment. It is thus recommended that government should reassess the content of her defense expenditure and make it more transparent and growth oriented.