THE IMPACT OF GOVERNMENT TRANSFER ON HUMAN CAPITAL DEVELOPMENT IN NIGERIA

Abstract

Despite substantial government expenditure, Nigeria continues to experience poor human 
development outcomes, raising concerns about the effectiveness of transfer expenditure, including pensions, subsidies, social security payments, and welfare interventions. This study examines the impact of government transfer expenditure on human capital development in Nigeria over the period 1985–2024. The study employs the Autoregressive Distributed Lag (ARDL) estimation technique due to the mixed order of integration among the variables. Total labour force, population growth, and investment rate are included as control variables. Data were obtained from the Central Bank of Nigeria Statistical Bulletin, National Bureau of Statistics, and World Development Indicators. The findings reveal that transfer expenditure has a negative and statistically insignificant effect on human capital development in both the short and long run. Total labour force has a positive short-run but negative long-run effect, while population growth negatively affects human capital development in both periods. The investment rate has a positive short-run but negative long-run effect. The error correction mechanism confirms adjustment towards long-run equilibrium. The study concludes that transfer expenditure alone has not significantly improved human capital development in Nigeria, largely due to institutional weaknesses, poor targeting, and implementation challenges. It recommends better targeting and accountability of transfer programmes, increased investment in education and healthcare, labour market reforms, and improved allocation of investment towards human capital development.