Asian Journal of Economics, Business and Accounting

Government Expenditure is a critical component of fiscal policy and plays a central role in shaping economic growth and development in any economy especially a developing one. This study investigates the impact of government expenditure on agricultural output in Nigeria from 1991–2025, employing the Autoregressive Distributed Lag (ARDL) bounds testing technique to capture both short-run and long-run dynamics. The analysis is based on secondary data obtained from the Central Bank of Nigeria, Statistical Bulletin and the National Bureau of Statistics, with agricultural output as the dependent variable and government recurrent expenditure, government capital expenditure, and government subsidies to farmers as the independent variables. Also interest rate is used as a control variable. The study is anchored on the Keynesian economic theory, which posits that increased government spending stimulates output and employment. The empirical findings reveal that government recurrent expenditure (1.672369) exerts a positive and statistically significant effect on agricultural output in both the short run and the long run. On the other hand, government capital expenditure (-0.698921) displays a negative and statistically insignificant relationship with agricultural output whereas government subsidies to farmers (-0.290524) also exhibit a negative and insignificant impact on agricultural output. Based on these findings, the study recommends strengthening the efficiency of recurrent spending, and the restructuring capital expenditure and subsidy programs to ensure proper targeting, accountability, and long-term productivity. This study is justified because Nigeria’s agricultural sector continues to underperform despite heavy government spending, making it necessary to assess the effectiveness of capital expenditure, recurrent expenditure, and subsidies in driving agricultural output growth.