Impact of Public Spending on Poverty Reduction in Nigeria

Abstract

This study examined the impact of public spending on poverty reduction in Nigeria, focusing on Education and health. Using time-series data from 1985 to 2016, the Autoregressive Distributed Lag (ARDL) model assessed short- and long-term effects. Descriptive statistics showed an average poverty rate of 55.50%, with government spending on Education and health averaging ₦113.43 billion and ₦65.97 billion, respectively. Despite increased expenditure, poverty remained high. The unit root test confirmed stationarity at the first difference, and cointegration analysis indicated a long-run relationship. ARDL results showed a 1% increase in health spending reduced poverty by 0.09%, while education spending had a positive short-run impact but turned negative long-term. Economic growth significantly reduced poverty, with a coefficient of -0.69, while unemployment (0.052) increased it. The model was statistically significant (F-statistic=101.2872, R² = 0.9956), explaining 99.56% of poverty variations - findings aligned with Wagner's Law and endogenous growth theories, emphasising strategic resource allocation. Policy recommendations included improved transparency, efficient budgeting, and stronger social programs. The study concluded that while public spending is crucial for economic progress, its effectiveness depends on implementation, governance, and long-term strategies.