Fiscal constraint and education expenditure in Nigeria: how critical is political institution?

Abstract

PurposeThis paper examines the impact of fiscal constraints on education expenditure in Nigeria from 1981 to 2021, using annual time series data.Design/methodology/approachThe study deployed cointegration techniques with structural breaks.FindingsCointegration was found between education expenditure, debt servicing (a proxy for fiscal constraint) and associated variables. In both the long and short run, debt servicing negatively and significantly impacts education expenditure. While government revenue has a positive and significant impact on education expenditure in the long and short run, political institution has a negative and significant impact in the long run. Political institution is thus critical to education financing in Nigeria. The impact of debt is positive and significant in the short run, but not significant in the long run. There is a unidirectional causality from debt servicing to education expenditure.Practical implicationsPolitical institutions are critical towards contracting only productive debts and checkmating the adverse political environment through political will that prioritizes education financing.Originality/valueThe study extends the empirical literature on the fiscal constraint-education expenditure first by investigating fiscal constraint-education expenditure nexus given the institutional environment, and second by extending the methodology using cointegration techniques in the midst of structural breaks.Peer reviewThe peer review history for this article is available at: https://publons.com/publon/10.1108/IJSE-10-2022-0682.