Can government spending improve the quality of life in Nigeria? An ARDL and Spectral Granger Causality approach

People’s standard of living in any economy is essential. A nation can measure the impact of its fiscal policies on its citizens through an accurate estimation of the GDP per capita. Hence, this research evaluates the effects of government spending on the quality of life (standard of living) in Nigeria between 1981 and 2022 using the Autoregressive Distributed Lag (ARDL) and Spectral Granger Causality methods. GDP Per Capita is a proxy for the quality of life, while government capital and recurrent expenditures are the proxies for government spending. In addition, inflation rate and money supply are used as control variables. The rationale of this study lies in the importance of comprehending whether government spending in Nigeria helps solve socio–economic challenges. This can provide valuable insights as to whether fiscal policies in Nigeria are effective or need restructuring. The results are as follows: (i) The bound test showed proof of a long–term relationship. (ii) In the long–term, the effect of government recurrent expenditure is beneficial, while capital spending is negative. (iii) In the short–run, both proxies for government spending showed a positive impact; inflation conformed to theory, remaining negative, while money supply also hurt the quality of life. (iv) The Spectral Granger Causality showed that capital expenditure, recurrent expenditure, inflation, and money supply granger cause quality of life in the long–term. This study recommends that strong institutions should be established because they will allow funds for capital projects to be efficiently utilized, promoting transparency and accountability.