EMPIRICAL ANALYSIS OF GOVERNMENT CAPITAL EXPENDITURE AND ECONOMIC DEVELOPMENT IN NIGERIA

Abstract

This study examines the relationship between government expenditure and economic development in Nigeria, against the backdrop of persistent fiscal inefficiencies, corruption, and weak accountability that have limited the impact of rising public spending on citizens’ welfare. Despite increased government expenditure over the years, Nigeria continues to experience high poverty, unemployment, and inadequate access to basic services, raising concerns about the effectiveness of fiscal policy in driving development. Anchored on Wagner’s theory of increasing state activity and Keynesian theory, the study specifically investigates the impact of capital expenditure on Gross Domestic Product (GDP), Human Development Index (HDI), and Consumer Price Index (CPI) over the period 2001–2020. Using a correlational and ex-post facto research design, secondary time-series data were sourced from the Central Bank of Nigeria and related statistical publications, and analyzed using regression techniques. The findings reveal a significant positive relationship between capital expenditure and GDP, indicating that public investment contributes to economic growth. Similarly, capital expenditure shows a significant relationship with HDI, suggesting its relevance in improving human development outcomes. However, no significant relationship was found between capital expenditure and CPI, implying limited influence on price stability. The study concludes that while capital expenditure plays a vital role in enhancing economic growth and human development, its effectiveness is constrained by inefficiencies in public financial management. It therefore recommends improved monitoring, transparency, and strategic allocation of public funds toward productive sectors to ensure sustainable economic development in Nigeria.