Olonite Theory of Public Finance and Economic Growth / Development (2019) Explained

This study analyzed the Keynesian theory of public finance and economic growth and the Wagner’s Law of ever increasing state activities. The study used the secondary data from CBN 2019. The Real Gross Domestic Product formed the dependent variable and the independent variable of interest were the Capital Spending on Economic Services, and Spending of Transfers. The variables were validated by conducting the unit root test using the Augmented Dickey Fuller (ADF) and Phillips Perron Test (PP), and the correlation coefficient were determined using STATA and the Pearson Product Moment Correlation. A multiple regression model was employed for the study and was analysed using the Generalized Least Squares (GLSs) with the aid of Eviews 11 statistical program. The results of the study indicate that Capital Spending on Economic Services has a positive and significant impact on Economic Growth while Spending on Transfer has a negative and insignificant impact on Economic Growth. The study recommends the Olonite Theory of Public Finance and Economic Growth/Development [that Capital Spending on Economic Services should be maintained and increased and Spending on Transfer should be made Zero especially the non performing functions, also, the government should develop the refineries to start mass production in order to null off the negative effect of transfers (subsidy payment on oil import and price equalization)]