Abstract

Defense spending can have both positive and negative impacts on an economy. On the positive side, it can stimulate
economic growth by increasing demand and enhancing security. However, it can also have negative consequences
by displacing investment. In countries with a domestic defense industry, military expenditure tends to have a more
significant positive effect on economic growth. However, in the case of Nigeria, which lacks a domestic arms industry
and relies heavily on importing military equipment, any increase in military spending is more likely to worsen
Nigeria's trade deficit rather than boost its GDP. This paper examines the effects of defense expenditure on the
economy. While some studies have found a direct positive relationship between military spending and economic
growth, these studies were conducted during peaceful times and not in the midst of security challenges. Therefore,
in developing economies like Nigeria, which face security challenges, the conditions necessary for defense spending
to drive economic growth may be absent. For instance, looking at Nigeria's 1986 budget, only 5.69 percent of
government expenditure was allocated to the defense sector. This percentage fluctuated in the subsequent years,
with an increase during the early years of democratic governance, followed by a decline. This suggests that when
countries grapple with security challenges and are compelled to allocate resources to their military at the expense
of other pressing needs, such spending may not yield
Keywords: Defense, Expenditure, Economy, Budget and Impact