Digitalization and Cost Efficiency in the Ogun State Public Sector, Nigeria

Abstract

This study examined the effect of Digitalization on Cost Efficiency (CE) in the Ogun State public sector, Nigeria. Specifically, it evaluated the influence of key digital financial management systems, Government Integrated Financial Management Information System (GIFMIS), Integrated Personnel and Payroll Information System (IPPIS), Treasury Single Account (TSA), and Digital Infrastructure (DI) on CE. Data were collected from 396 employees across nineteen (19) ministries using a structured five-point Likert scale questionnaire, out of which 389 responses were obtained for analysis. The data were analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) via SmartPLS 4.0.

The findings revealed that digitalization had a statistically significant effect on CE in Ogun State (p = 0.046 < 0.05). However, the model’s explanatory power is relatively low (R² = 0.169), indicating that digitalization accounted for only a limited proportion of the variation in CE and suggesting that other relevant factors not included in the model may also influence outcomes. DI exhibited a statistically significant and positive effect on CE (β = 0.275, p = 0000), indicating that infrastructure improvements contributed to enhanced CE. Conversely, GIFMIS (β = -0.405) and IPPIS (β = -0.301) exhibited negative, statistically insignificant effects. This may be attributed to implementation challenges such as inadequate technical capacity, poor system integration, resistance to change, and institutional inefficiencies, which limit their effectiveness despite their theoretical importance in public financial management. TSA (β = 0.460) demonstrated a positive but statistically insignificant relationship with CE, suggesting that its potential benefits may not yet be fully realized.

The study concluded that digitalization significantly influenced CE. However, its impact varies across different digital systems and depends largely on implementation effectiveness and institutional context. It recommends strengthening user capacity, improving system integration, and enhancing governance frameworks to ensure effective utilization of digital systems. Additionally, policymakers should complement infrastructure investments with institutional reforms and performance monitoring mechanisms.