The impact of stabilization policies on human development index in Nigeria

Abstract

This study is motivated by the sustained unimpressive ranking of Nigeria’s Human Development Index in the annual global Human development report by UNDP over the past four decades. The situation is worrisome because low human development index reflects poor health outcomes, deterioration in educational system, and an abysmal standard of living that is significantly below globally acceptable thresholds with about 133 million persons considered as multidimensionally poor in Nigeria. The persistence and recurring decimal of unsteady growth rate and low HDI scores have called to question the effectiveness of stabilization policies broadly categorized as monetary policy and fiscal policy and designed to chart a course for stimulation of overall economic performances, macroeconomic recoveries and most importantly, optimization of the general welfare of the people. Therefore, the study empirically evaluates the impact of stabilization policy toolkits on human development index in Nigeria. To this end, annual time series secondary data from 1990 to 2021 were sourced from Central Bank of Nigeria Statistical Bulletin and UNDP Global Human Development Reports for various years within the review period. The study employs Autoregressive Distributed Lag (ARDL) estimation technique in line with the fulfilment of mixed order of integration from the ADF unit root test. The results of our empirical analysis revealed that Government Expenditure (GEX) and Tax Revenue (TRE) have positive and statistically significant relationships with HDI in Nigeria. Also, with the impact of Broad Money Supply (BMP) being positive and statistically significant, Monetary Policy Rate (MPR) and inflation rate (IFR) have negative impacts on HDI but are statistically significant in explaining variations in HDI within the review period. Therefore, the study concludes that each stabilization policy is crucial in improving HDI, but fiscal policy appears to be more potent in comparison. The study recommends reassessment of government expenditure architecture to accommodate public works; tax policy reforms that will guarantee sustained tax revenue; and extended regulatory framework that will decongest the magnitude of cash in the shadow economy to curtail the menace of inflationary shocks.