Assessing the Relationships between Fiscal Deficit, Economic and Social Infrastructure in Nigeria: Evidence from an ARDL Approach

In developing nations such as Nigeria, fiscal deficits are a central issue in economic discourse, particularly where they intersect with infrastructure development. This study explores the relationship between fiscal deficits and infrastructure development in Nigeria, focusing on both economic and social infrastructure, using annual time series data from 1986 to 2021. The aim is to investigate how fiscal deficits influence infrastructure development in both the short and long run, with a focus on the roles of government spending and access to key infrastructure services. The study hypothesises that fiscal deficits may exacerbate infrastructure gaps, particularly in education, healthcare, and transportation. Using the Autoregressive Distributed Lag (ARDL) model, the results reveal that in the short run, variables such as access to electricity, air transport passenger traffic carried, government spending on health, and air transport freight exhibit a detrimental effect on fiscal deficit, although these effects are not statistically significant. Conversely, the long-term estimates show that increased health and education spending significantly worsen the fiscal deficit, underscoring the fiscal burden of social infrastructure investment. The study suggests that strategic investments in education, health, and electricity are critical for long-term economic expansion. At the same time, it highlights the potential risks associated with excessive recurrent expenditure, which can undermine long-term fiscal stability. The theoretical implications of the findings align with Keynesian and Endogenous Growth theories, while practical significance lies in providing policy recommendations for strategic investment in infrastructure to foster economic development, enhance social well-being, and improve Nigeria’s global competitiveness.