Infrastructure Financing, Institutional Quality, and Poverty in Nigeria

Abstract

This study investigated the baseline and interactive effects of infrastructure financing and institutional quality on poverty reduction in Nigeria. The study adopted an ex-post facto research design, utilizing secondary time-series data covering a twenty-six-year period (1999–2024). Data were analyzed using the Johansen Cointegration test and Ordinary Least Squares (OLS) multiple regression. The baseline OLS regression results (Model 1) revealed that public expenditure on infrastructure had a significant positive impact on per capita income (β = 0.1056, t = 3.1803, p = 0.0043), while unmoderated private investment was statistically insignificant (β = 0.0103, t = 0.6154, p = 0.5446), yielding an R2 of 0.3465 and an F-statistic of 3.8887 (p = 0.0226). However, in the interactive model (Model 2) where financing was moderated by institutional quality, private investment demonstrated a highly significant positive impact on poverty alleviation (β = 3.76E-07, t = 6.5553, p = 0.0000), causing the explanatory power of the model to surge to an R2 of 0.7800 and an F-statistic of 24.8197 (p = 0.0000). Conversely, public expenditure moderated by institutional quality lost its statistical significance (β = 2.77E-06, t = 1.3057, p = 0.2058), exposing a profound public spending paradox where government funds are neutralized by systemic inefficiencies. The study concluded that public capital expenditure is statistically inefficient at reducing poverty in the absence of strong governance, whereas institutionally protected private investment acts as a vital catalyst for wealth creation. Therefore, the study recommends the aggressive promotion of Public-Private Partnerships and the implementation of comprehensive anti-corruption reforms to maximize the macroeconomic impact of infrastructure investments.