AN EMPIRICAL ANALYSIS OF THE RELATIONSHIP BETWEEN GOVERNMENT TRANSFER PAYMENTS AND ECONOMIC GROWTH IN NIGERIA COLLEGE OF PRIVATE SECTOR ACCOUNTING JOURNAL

Abstract

Government transfer payments play a critical role in Nigeria's fiscal strategy, functioning as instruments for poverty alleviation, economic stabilization, and inclusive growth. In a context where over 63% of the population approximately 133 million people live in multidimensional poverty (National Bureau of Statistics, 2023), transfers such as cash payments, pensions, and other social benefits are essential for supporting vulnerable households and sustaining consumption. This study examines the relationship between government transfer payments and economic growth in Nigeria using secondary data sourced from the Central Bank of Nigeria (CBN), the National Bureau of Statistics (NBS), and other official records. Employing econometric modelling, the analysis investigates how variations in transfer expenditures influence Gross Domestic Product (GDP), employment, and inflation. The findings reveal a significant positive effect of government transfer payments on economic growth in the short term, primarily through enhanced household consumption and increased aggregate demand. Programmes such as direct cash transfers and pension schemes were found to stimulate economic activity. However, the long-term effects are more complex, with concerns about inflationary tendencies, fiscal sustainability, and inefficiencies in distribution mechanisms that limit the full benefits of these transfers. Bureaucratic constraints and weak targeting systems further reduce their developmental impact. The study recommends strengthening transparency, improving targeting mechanisms, and adopting technology-driven distribution systems to minimize leakages and ensure efficient allocation. Enhancing administrative efficiency and accountability will help maximize the growth-inducing potential of government transfer payments while ensuring that fiscal resources achieve their intended developmental objectives.

Keywords: Economic growth, Employment rate, Government transfer payments, Gross Domestic Product, Inflation levels