Government Expenditure Efficiency and Economic Development in Nigeria (1981–2022)

This study examines the relationship between government expenditure efficiency and economic development in Nigeria over the period 1981 to 2022, using time series regression techniques. Nigeria presents a paradoxical development landscape: a country endowed with vast natural resources and significant public revenue, yet consistently underperforming on key development indicators. The central question this paper asks is whether government spending, particularly the composition and efficiency of that spending, meaningfully drives per capita income growth. The study distinguishes between recurrent and capital expenditure as core independent variables, while controlling for inflation, population growth, trade openness, institutional quality, natural resource dependence, human capital proxied by life expectancy, and infrastructure development proxied by electricity access. Employing Ordinary Least Squares, Fully Modified OLS, Dynamic OLS, and the Autoregressive Distributed Lag framework, the study confirms the presence of long-run cointegrating relationships among the variables. Capital expenditure exerts a strong positive effect on GDP per capita growth, while recurrent expenditure is associated with a significant negative dampening of growth. Natural resource dependence, high inflation, and population growth are confirmed structural drag factors, while institutional quality, trade openness, human capital, and infrastructure all positively and significantly contribute to economic development. The study contributes a comprehensive, multi-model empirical analysis with policy-relevant recommendations for expenditure reorientation, institutional reform, and diversification away from oil dependency.