ABSTRACT

There has been a steady increase in poverty, starvation, and hunger across Africa as a result of the continent's inherent level of underdevelopment, which has also contributed to the spread of terrorism, political instability, and separatist agendas across the continent and the takeover of Nigeria's and Ghana's political landscapes by extremist groups. Despite its enormous international and domestic debt ceiling, the government faces a variety of pressures to address these problems by increasing public spending. Nigeria and Ghana's governments have renewed optimism of expanding public expenditure via foreign help to this goal. Based on this premise, the study empirically investigates the impact of foreign aid on public expenditure in Nigeria and Ghana from 1981 through 2021. The Study objectively at; establishing the link between; foreign official development assistance (ODA); foreign grant; foreign technical cooperation and public expenditure in both economies over the study scope. The study implored structural unit root, ARDL bound test, ARDL error correction model and auto regressive distributive lag model (ARDL) to regress public expenditure growth (LOGPUBEXGR) for Nigeria and Ghana against foreign official development assistance (LOGFODA), foreign multilateral aids (LOGMFAID), foreign grant (LOGFGRANT) and exchange rate (LOGEXR). The result of empirical examination proved that; increasing the coefficient of exchange rate in Ghana for the period would translate to 175.92% increase in public expenditure growth. In Nigeria, exchange rate likewise showcased a positive additive relationship with public expenditure growth, thus a one percent increase in exchange rate in Nigeria would transmit to 82.75% rise in public expenditure growth in Nigeria. Furthermore, increasing foreign grant for this period in Ghana would transmit a decline of 4.30% in public expenditure growth at a significant rate of 0.006%. in Nigeria. Foreign grant indices indicated a negative influence over the Nigerian economy for the study scope, thus increasing foreign grant in the country for the study duration is expected to transmit 3.72% decline in the values of public expenditure growth tendencies in the country. The study therefore recommends that; government of Nigeria and Ghana should carryout proper review of grants conditions to making sure, it aligns with the corporate developmental goal of the economy over time. Government should review the conditions on the basis of – grant performance requirements; cashback provisions and monitoring, while also favoring National sovereignty over neocolonialism. The study concludes that, while foreign aids in all form has an additive value to government bulk expenditure in Nigeria and Ghana, technical aids has more impactful dimension on long run growth of government expenditure in both countries.