Determinants of Standard of Living in Nigeria: An Empirical Investigation (1980–2024)

This study investigates the macroeconomic and fiscal determinants of the standard of living in Nigeria over the 45-year period from 1980 to 2024. In contrast to conventional growth-centric paradigms that equate development solely with aggregate Gross Domestic Product (GDP), the standard of living is conceptualised as multidimensional human capability and operationalised through the Human Development Index (HDI). Explanatory regressors encompass headline inflation rate, unemployment rate, public capital and recurrent expenditure on education, public expenditure on healthcare, and real GDP per capita. Employing annual time-series data extracted from the Central Bank of Nigeria, the National Bureau of Statistics, the World Bank, and the United Nations Development Programme, the empirical enquiry deploys Augmented Dickey-Fuller (ADF) unit root testing, the Autoregressive Distributed Lag (ARDL) bounds cointegration framework, an Error Correction Model (ECM), and pairwise Granger causality tests. The unit root diagnostics confirm a mutually integrated order of variables, I(0) and I(1), validating the ARDL specification. The bounds test confirms a cointegrating relationship (F-statistic = 11 .087, exceeding the 1% upper critical bound). Empirical estimates reveal that inflation exhibits a negative but statistically non-significant coefficient. Unemployment does not affect welfare contemporaneously but exerts adverse, statistically significant lagged impacts (ΔUNEt- 1 = -0.0049, p < 0.001; ΔUNEt-2 = -0.0037, p < 0.001). Public spending on education demonstrates robust positive lagged contributions to human development (ΔlnGEEt- 1 = 0.0094, p = 0.002; ΔlnGEEt-2 = 0.0114, p < 0.001). Conversely, public health expenditure displays significant negative short-run lagged adjustments, reflecting absorption constraints and procurement gestation lags, despite yielding positive equilibrium levels (long-run elasticity = 0.0705, p < 0.001). Crucially, real GDP per capita exhibits a contemporaneous negative coefficient (-0.0070, p = 0.003), turning positive only after three lags, indicating that headline growth fails to improve quality of life immediately in the presence of structural inequality. The error correction coefficient (-0.3566, p < 0.001) demonstrates a 35.7% annual speed of adjustment towards long-run steady state. Pairwise causality confirms unidirectional linkages running from HDI to education and health expenditures, and from human capital expenditures to output growth. Strategic policy must prioritise targeted social expenditure, employment-intensive economic expansion, and macroeconomic stability over aggregate production alone.