Public Expenditure and Economic Development in Nigeria

Abstract

This study investigates the relationship between public expenditure and economic development in Nigeria, focusing on the distinct effects of capital and recurrent expenditure. Anchored on Human Capital Theory, the study aims to determine how these two expenditure components influence improvements in the Human Development Index (HDI) as a holistic measure of development. A positivist and deductive research design was adopted, relying on ex-post facto and time-series methods. Secondary data covering 1981–2022 were sourced from the World Development Indicators, UNDP Human Development Reports, and the Central Bank of Nigeria Statistical Bulletin. Descriptive statistics, Augmented Dickey–Fuller unit root tests, and Granger causality techniques were employed alongside multiple regression analysis to assess the developmental implications of both expenditure types. The empirical results show that capital expenditure significantly enhances economic development by improving HDI outcomes. This aligns with conceptual and empirical perspectives that view capital spending on infrastructure, education, and health as productive investment that reduces production costs, stimulates innovation, and strengthens long-run human capital formation. Recurrent expenditure also demonstrates a positive and significant effect on HDI, highlighting its essential role in sustaining government operations and ensuring effective delivery of public services. These findings support the view that both categories of public expenditure are integral to improving welfare, expanding economic choices, and advancing long-term development. The study concludes that efficient and welltargeted public expenditure is vital for Nigeria’s developmental progress. It recommends strengthening the productivity of capital expenditure through transparent project appraisal, better monitoring, and prioritization of growth-enhancing infrastructure. It further recommends enhancing the efficiency of recurrent expenditure by reducing leakages, aligning spending with service delivery needs, and improving resource allocation in education and healthcare. These measures will ensure that public expenditure translates more effectively into human development gains.