THE IMPACT OF EDUCATION IN THE DEVELOPMENT OF NIGERIA ECONOMY

Abstract: This study investigates the relationship between government spending on education and economic development in Nigeria using annual time series data for the period of 1981 to 2013 sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin. Using Johansen`s co-integrated test it was established that there is evidence of long run relationship between GDP and government spending on education. The long run coefficient of both capital and recurrent expenditures are statistically significant and are positively related to growth. The error correction term is negative and statistically significant. This suggests there is no sign of any problem in the adjustment from short run to long run equilibrium. The test for Granger causality also shows evidence of a bi-directional causality between recurrent expenditure and economic growth and a unidirectional causality running from capital expenditure to GDP as a proxy to economic growth. We therefore concludes that both capital and recurrent government spending on education positively influenced economic growth in Nigeria over the period under study and hence the paper recommends that, government should increase budgetary allocation on education expenditure in general in order to improve its effect on the growth of the Nigerian economy.