Government Expenditure Composition and Human Capital Development in Nigeria

The study examined the impact of government expenditure composition on human capital development in Nigeria from 1985–2025. Annual time series data were obtained from the Central Bank of Nigeria (CBN) Statistical Bulletin, the National Bureau of Statistics (NBS), and the World Development Indicators (WDI). The Auto-Regressive Distributed Lag (ARDL) technique was employed to estimate both the short-run and long-run relationships between government expenditure composition and human capital development. The ARDL bounds test confirmed the existence of a long-run relationship among the variables. The long-run estimates revealed that government expenditure on education exerted a negative and statistically significant effect on human capital development, while expenditure on health and gross capital formation had positive and significant effects. Inflation exhibited a negative but statistically insignificant effect. The estimated error correction term indicated a high speed of adjustment toward long-run equilibrium, implying that short-run disequilibria were corrected rapidly. The findings established that the composition and efficiency of government expenditure, rather than its aggregate size, are crucial for promoting human capital development in Nigeria. The study recommends improving expenditure efficiency, increasing budgetary allocations to the education and health sectors, and strengthening institutional frameworks to ensure prudent management of public expenditure.