Government Infrastructure Spending and its Influence on the Growth of the Money Market: A Temporal Analysis of Fintech Growth in Nigeria

Abstract

This study investigates the impact of government infrastructure spending on the growth of the money market and the Fintech sector in Nigeria, adopting a temporal analysis approach to evaluate long-term dynamics and causal relationships. Against the backdrop of Nigeria's evolving economic landscape and the increasing prominence of Fintech as a driver of financial innovation and inclusion, the study explores how various components of public infrastructure expenditure—including allocations to education, agriculture, transport and communication, and total capital outlay—affect financial market development and digital finance expansion. Using annual time-series data from 2010 to 2023, sourced from the Central Bank of Nigeria (CBN), National Bureau of Statistics (NBS), and financial market reports, the study applies Augmented Dickey-Fuller (ADF) tests, Johansen Co-integration analysis, and an Ordinary Least Squares (OLS) regression model to examine both the short- and long-run relationships among variables. The empirical findings reveal that infrastructure spending, particularly in education and capital projects, significantly contributes to Fintech growth, as proxied by the aggregate value of POS, mobile, and web-based transactions. Furthermore, positive relationships are observed between infrastructure expenditure and key money market indicators such as liquidity and transaction volumes. The regression results exhibit high explanatory power, with an adjusted R-squared of 0.98, and show that both recurrent and capital expenditures influence financial sector growth, although with varied temporal lags. The study concludes that government infrastructure investment serves as a critical catalyst for financial system development, especially in digital finance, and recommends a multi-pronged policy approach focused on sustained infrastructure financing, human capital development, regulatory enhancement, and strategic planning that acknowledges time-lag effects. By bridging a notable gap in the empirical literature, this research provides vital insights for policymakers, development economists, and financial sector stakeholders seeking to align fiscal policy with inclusive financial innovation and economic transformation.