Effect of Public Finance Management and Government Effectiveness: Empirical Evidence From Nigeria

The study empirically examined the relationship between public finance management and government effectiveness in Nigeria, using the seven PEFA-based fiscal governance indicators as proxies for public finance management while government effectiveness served as proxy for governance index. The descriptive research design was adopted for the study and secondary data for a period of 2000 to 2022 were analyzed. The PFM variables included budget reliability, transparency of public finances, management of assets and liabilities, policy-based fiscal strategy and budgeting, predictability and control in budget execution, accounting and reporting, and external scrutiny and audit. Employing the Augmented Dickey-Fuller (ADF) test, the Engle–Granger cointegration approach, and an Error Correction Model (ECM), the study examined both long-run and short-run dynamics. The results indicated that all variables are integrated of order one, I(1), and are cointegrated, confirming the existence of a long-run equilibrium relationship. The ECM results show a significant and negative error correction term, indicating rapid adjustment toward equilibrium. In the short run, budget reliability and policy-based fiscal strategy and budgeting are the only statistically significant determinants of government effectiveness. The study concludes that strong institutions, effective PFM systems, and genuine political commitment are crucial to driving government effectiveness. It was recommended that sustained commitment to transparent, accountable, and rules-based public financial management remains essential for strengthening institutional performance and achieving government effectiveness