Capital Expenditures and Economic Development in Nigeria: The Moderating Effect of Inflation Rate

This study examines the relationship between capital expenditure and economic development in Nigeria with specific attention to inflation's moderating effect. Using the Human Development Index (HDI) as a measure of economic development, capital expenditure as a percentage of GDP as the independent variable, and inflation rate as the moderating variable, this study provides a full analysis of Nigeria's development path over twenty-five years of democratic governance. The findings reveal that despite modest increases in capital expenditure during certain periods, Nigeria's HDI showed only gradual improvement, rising from 0.445 in 1999 to 0.567 in 2024, maintaining the country's classification in the medium human development category. The study demonstrates that persistent inflationary pressures, which averaged 12.64% during the period, significantly moderated the effectiveness of capital spending on development outcomes. The considerable fluctuations in capital expenditure, ranging from 1.12% to 5.21% of GDP, further illuminate the inconsistent approach to development financing in Nigeria. This study contributes to the discourse on development economics by highlighting how macroeconomic instability can undermine public investment effectiveness in developing economies. The findings emphasize the need for integrated policy approaches that simultaneously address capital investment adequacy, macroeconomic stability, and institutional effectiveness to achieve sustainable economic development in Nigeria. This study recommended that increasing and stabilizing capital expenditure above 5% of GDP, implementing more effective inflation management strategies, and enhancing project selection and implementation processes to maximize development impact.