This paper analyzes empirically the impact of education expenditure on economic growth in Nigeria over the period of 1981-2010. Cointegration and Granger causality tests are used in order to analyze the causal nexus between education expenditure and economic growth. It is crucial to see the directions of causality between the variables used. It was found that there is cointegration between real growth rate of gross domestic product, total government expenditure on education, recurrent expenditure on education and Primary school enrolment. The result also revealedthat there is no causality between real growth rate of gross domestic product (RGDPG) and Total government expenditure on education (TGVTEE) but there is bi-directional causality between recurrent expenditure on education (REDEXP) and total government expenditure on education (TGVTEE). Primary school enrollment (PRYSE) does not Granger cause Total government expenditure on education (TGVTEE), the latter does Granger cause the former. No causality between recurrent expenditure on education (REDEXP) and real growth rate of gross domestic product (RGDPG) and also no causality between Primary school enrolment (PRYSE) and Real Growth Rate of gross domestic product and consequently the study recommends that the government should improve manpower, the quality of life of ordinary Nigerians and teacher education should be given desired attention in order to check the falling standard of education in the country.
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