Abstract
This study examines the effect of education and health expenditure on the growth rate of the Nigerian economy using annual time-series data covering the period 1981 to 2024. The study is motivated by the need to understand whether government spending on the social sector contributes significantly to economic growth in Nigeria, especially in the face of persistent low growth, rising inflation, and challenges in the education and health sectors. The study adopts an ex post facto research design and relies on secondary data obtained from the Central Bank of Nigeria Statistical Bulletin and the World Bank World Development Indicators. The study employs the economic growth rate measured by real gross domestic product growth rate as the dependent variable, while government expenditure on education, government expenditure on health, literacy rate, life expectancy, and inflation rate are used as explanatory variables. The autoregressive distributed lag (ARDL) model is subsequently employed to estimate both the short-run and long-run effects of education and health expenditure on economic growth in Nigeria. The results of the study reveal that a long-run relationship exists between education expenditure, health expenditure, literacy rate, life expectancy, inflation rate, and economic growth rate in Nigeria. The long-run regression result shows that education expenditure has a positive but insignificant effect on economic growth, while health expenditure has a significant negative effect on economic growth. Life expectancy is found to have a positive and statistically significant effect on economic growth, while literacy rate has a positive but insignificant effect. Inflation rate shows a negative relationship with economic growth, although the effect is not statistically significant. The study concludes that improvements in human capital outcomes, particularly life expectancy, contribute more significantly to economic growth in Nigeria than government expenditure alone. The study recommends that the government should improve the efficiency of public spending on education and health and focus more on policies that enhance human capital development in order to promote sustainable economic growth in Nigeria.