Wagner proposition in Nigeria: An econometric analysis

Area of Science:

• Economics
• Public Finance
• Fiscal Policy Analysis

Background:

• The study examines Adolph Wagner's 1883 Proposition, as interpreted by Peacock and Wiseman (1961), within the Nigerian economic context.
• Nigeria's economic data over an eight-year period was analyzed to validate this fiscal policy theory.
• Concerns regarding global economic indicators and monetary authority data prompted specific analytical approaches.

Purpose of the Study:

• To empirically test the long-run validity of Wagner's Proposition in Nigeria.
• To investigate the relationship between government spending and economic indicators in Nigeria.
• To provide evidence-based recommendations for fiscal policy reform in Nigeria.

Main Methods:

• The Augmented Dickey-Fuller (ADF) test with structural breaks was employed to assess data stationarity.
• The Autoregressive Distributed Lag (ARDL) model was utilized for time-series analysis, with automatic lag selection.
• A Bound test (F-statistics) was conducted to determine long-run cointegration.

Main Results:

• The ADF test indicated positive results at alternating integrating orders, suggesting structural breaks.
• While significant short-run associations and bi-directional causality were found, the Bound test F-statistic (3.42) fell below critical values (I(0)=4.68, I(1)=5.15).
• The long-run cointegration required for Wagner's Proposition was not established in the Nigerian context.

Conclusions:

• Wagner's Proposition, in its Peacock and Wiseman (1961) interpretation, is not validated in the long run for Nigeria.
• The findings underscore the necessity of streamlining non-economically viable and overlapping government ministries, departments, and agencies (MDAs).
• Fiscal consolidation through MDA rationalization is crucial for Nigeria's economic stability and efficiency.