Impact of Capital Expenditure on Real Sector Performance in Nigeria

This study examines the impact of fiscal and monetary policy tools on Nigeria’s real sector, particularly focusing on government capital expenditure. Employing time-series data from 1981 to 2023 to estimate the using the ARDL model and the bound test for cointegration, the findings reveal a significant positive correlation between capital expenditure and real sector output, affirming Keynesian theory over monetarist perspectives. While the Monetary Policy Rate (MPR) initially stimulates manufacturing output, its long-term impact is negative, indicating its short-term effectiveness. The results suggest that a structured expansionary fiscal policy is essential to drive productivity across key economic sectors, ultimately fostering economic stability. Recommendations include increasing budget allocation for the real sector, regulating interest rates, and ensuring strict monitoring of allocated funds.