Public Sector Spending and Social Welfare: Evidence from Nigeria

The study examined the effect of Government Spending on social welfare in Nigeria for the period 1970-2022 based on data obtain from central bank annual bulletin and world bank and using auto regressive distributive Lag to determine the short run and long run effects of the variable of study. Public sector spending was the independent variable proxied as Capital and recurrent expenditure with total expenditure considered for robustness while social welfare was measured in terms of unemployment and inflation in the economy. The higher the rate of inflation the lower the value of money and the lower the welfare and standard of living of citizens while the higher the unemployment rate the lower the number of persons employed and the lower the social welfare of citizens The goal of government fiscal policy is to achieve low inflation simultaneously with low unemployment. Result revealed a significant negative long run effect of capital expenditure, recurrent expenditure and total expenditure on inflation implying public spending can be used to curtail inflation. This aligns with the Keynesian theory that government interventions can boost production of goods and services thereby curtailing inflation. Capital expenditure and total expenditure significantly lead to reduction in unemployment in Nigeria. From the result of the study we confirmed that long run public sector spending mitigate inflation and unemployment simultaneously thus rejecting Philip curve which suggest inverse relationship. Based on the result of the study, government should boost capital expenditure to reduce unemployment. To reduce inflation government should increase spending to boost welfare of citizens.