Public Sector Financial Management and the Efficiency of Government Expenditure in Nigeria

This study investigates the relationship between Public Sector Financial Management practices and the efficiency of government expenditure in Nigeria using a comprehensive mixed-method approach. Quantitative analysis was conducted on secondary data from 2015 to 2024, involving 220 observations from Federal and State Ministries, Departments, and Agencies. The key PSFM dimensions analyzed include budgeting and planning, internal controls and audit, transparency and accountability, revenue mobilization, accounting and reporting, procurement, debt and cash management, and external audit oversight. The econometric modeling employed ordinary least squares (OLS) regression and structural equation modeling (SEM), incorporating tests for stationarity, autocorrelation, and multicollinearity. Descriptive statistics showed moderate variations in PSFM indicators, with means around 3 (on a 1-5 scale) across all variables. The regression results revealed limited statistical significance among predictors, with accounting reporting showing a marginally significant negative effect on expenditure efficiency (p = 0.0485). Other variables, including budgeting planning, internal control, transparency, revenue mobilization, procurement, debt management, and external audit, did not demonstrate statistically significant impacts on expenditure efficiency within the model, suggesting multifactorial challenges. The model exhibited a low R-squared of 0.037, highlighting the complexity and influence of unmeasured factors. Further dynamic analysis using cointegration and error correction modeling indicated a robust long-term equilibrium between financial governance structures and efficiency outcomes, with a substantial cointegrating coefficient (3,336.434) and moderate speed of adjustment (20-30% correction per period). This underscores that disruptions in financial management practices lead to persistent inefficiencies but are gradually corrected over time. The findings emphasize the need for strengthened institutional capacity, improved enforcement of financial regulations, and enhanced transparency to accelerate efficiency gains in Nigeria's public sector expenditure. This comprehensive multi-year study contributes to the evidence base on PSFM reforms effects on expenditure efficiency in developing country contexts, with specific insights for Nigerian fiscal policy reform and governance enhancement.