The Effect of Public Expenditure Management on Economic Efficiency in Nigeria
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Background of the Study
In recent years, public expenditure management (PEM) has emerged as a critical component of fiscal policy in Nigeria, directly influencing economic efficiency and sustainable development. Amid global calls for transparency and accountability, Nigeria has undertaken several initiatives to improve the planning, allocation, and monitoring of public spending (Olu, 2023). Historically, mismanagement of public funds, coupled with inefficient budgetary practices, has led to suboptimal resource utilization and persistent fiscal deficits. In response, recent reforms have aimed at streamlining expenditure processes, introducing performance-based budgeting, and implementing modern financial management systems. These efforts are designed to maximize the developmental impact of public spending by reducing wastage and ensuring that funds are directed toward priority sectors such as health, education, and infrastructure (Eze, 2024).
The transformation in public expenditure management is situated within a broader context of economic reform and governance improvement. Scholars argue that efficient PEM can catalyze economic growth by enhancing the quality of public services and fostering an environment conducive to private investment. The incorporation of technology in budgeting processes, including real-time monitoring and automated reporting systems, is expected to reduce bureaucratic delays and improve transparency (Nwankwo, 2023). Furthermore, the adoption of international best practices in fiscal management is critical in aligning Nigeria’s expenditure practices with global standards. However, while these reforms have shown promising signs, challenges remain—especially in addressing corruption, capacity constraints, and political interference (Akinola, 2024). The background of this study underscores the necessity for rigorous evaluation of PEM reforms to determine whether they have led to tangible improvements in economic efficiency. It also highlights the interplay between fiscal discipline and socio-economic development, particularly in a context where public expenditure is a key determinant of overall economic performance (Chinwe, 2023). This study thus aims to critically assess how recent advances in PEM are translating into economic efficiency, drawing on both qualitative and quantitative analyses.
Statement of the Problem
Notwithstanding the efforts to improve public expenditure management, Nigeria continues to face significant challenges that hinder economic efficiency. One of the primary issues is the persistent misallocation of resources, often due to outdated budgeting processes and inadequate monitoring mechanisms (Okoro, 2024). Despite the introduction of performance-based budgeting and digital financial management systems, inefficiencies still pervade the system. The lack of a robust accountability framework has allowed for continued leakages and misappropriation of public funds. Moreover, political interference and bureaucratic inertia have impeded the full realization of the benefits of PEM reforms (Uche, 2023).
The problem is further compounded by the inconsistent application of fiscal management practices across different government levels, leading to disparities in service delivery and regional development. There is a clear disconnect between the intended outcomes of PEM reforms and the ground realities observed in various sectors. This discrepancy not only undermines public trust in government institutions but also stifles economic growth by limiting the optimal use of scarce resources. The study, therefore, seeks to examine these issues in depth by investigating the operational challenges and institutional weaknesses that compromise economic efficiency. Through this analysis, the research will highlight the critical areas where reform efforts have fallen short and propose evidence-based strategies for addressing these gaps (Ifeanyi, 2025). Ultimately, the study aims to contribute to a more nuanced understanding of how public expenditure management practices can be enhanced to drive sustainable economic growth.
Objectives of the Study
- To assess the impact of improved public expenditure management on economic efficiency.
- To identify key operational and institutional challenges in the current expenditure system.
- To recommend strategies for optimizing resource allocation and reducing wastage.
Research Questions
- How does enhanced public expenditure management affect economic efficiency in Nigeria?
- What are the main challenges in the implementation of PEM reforms?
- Which policy interventions can improve the management and allocation of public funds?
Research Hypotheses
- H1: Improved public expenditure management significantly enhances economic efficiency.
- H2: Institutional weaknesses adversely affect the performance of PEM reforms.
- H3: Adoption of digital financial management systems leads to better resource allocation.
Scope and Limitations of the Study
The study covers PEM reforms implemented between 2020 and 2025 at federal, state, and local government levels. Data sources include governmental reports, audit findings, and academic literature. Limitations may arise from the availability and reliability of financial data and the difficulty in attributing economic outcomes solely to PEM initiatives.
Definitions of Terms
– Public Expenditure Management (PEM): The system and processes for planning, executing, and monitoring public spending.
– Economic Efficiency: The optimal use of resources to maximize output and development outcomes.
– Performance-Based Budgeting: A budgeting approach that links resource allocation to results achieved.
– Fiscal Discipline: The ability of a government to manage public funds responsibly.
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