Interactional impact of defence expenditure and political instability on economic growth in Nigeria: revisited

Over the last decade empirical research has increasingly recognized the significance of understanding how defence spending and political stability jointly influence economic growth in developing nations. This paper revisits the complex interplay between defence expenditure, political instability, and economic growth in the context of Nigeria, and for the period 1960-2021. Leveraging the robust Smooth Transition Autoregressive (STAR) model proposed by Granger and Terasvirta, this study aims to provide a comprehensive analysis of the dynamic relationships among these critical factors. Our investigation employs the STAR model to capture potential nonlinearities and regime shifts in these interactions (confirmed by the diagnostic tests), shedding light on how political instability may impact the effectiveness of defence spending on economic growth. The findings further reveal how military spending can influence political stability and governance, particularly in contexts where military resources wield significant power and influence. They also show that low military spending negatively impacts economic growth due to inadequate resources for security and stability maintenance. These findings hold vital implications for policymakers striving to enhance economic development amidst the backdrop of geopolitical uncertainty and security challenges.