THE EFFECT OF MONETARY AND FISCAL POLICIES ON PUBLIC EDUCATION EXPENDITURE IN NIGERIA (1980 - 2023)
Abstract
This study investigates the short-run and long-run effects of monetary and fiscal policies on public education expenditure in Nigeria from 1980 to 2023. Anchored in Human Capital Theory, the analysis employs an Autoregressive Distributed Lag (ARDL) bounds testing approach to cointegration on time-series data from the Central Bank of Nigeria and the World Bank. The empirical findings reveal a critical dichotomy: fiscal policy, proxied by total government spending, exerts a significant and positive long-run influence on education funding. In contrast, monetary policy variables inflation and exchange rate demonstrate weak, statistically insignificant long-run relationships. The short-run dynamics indicate that while foreign direct investment inflows have a positive immediate impact, government spending negatively affects education expenditure, suggesting potential budgetary reallocation or execution lags. Diagnostic tests confirm model stability, and impulse response analysis shows that shocks to government spending have more persistent effects on education budgets than inflationary shocks. The study concludes that fiscal policy is the predominant driver of education financing in Nigeria, with monetary policy playing a marginal and indirect role. Consequently, the paper recommends strengthening fiscal discipline, improving budgetary efficiency, and fostering enhanced monetary–fiscal coordination to ensure sustainable and resilient funding for Nigeria's education sector.
Keywords: Education Expenditure, Fiscal Policy, Monetary Policy, Human Capital, Inflation, Government Spending.
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