Public sector efficiency, bureaucratic structure, and inflation dynamics: a macro-institutional analysis of price stability in Nigeria

Persistent inflation in Nigeria has raised concerns about the effectiveness of conventional macroeconomic policy instruments, motivating renewed attention to the role of governance and public sector performance in shaping price dynamics. This study investigates the extent to which public sector efficiency and bureaucratic structure influence inflation outcomes in Nigeria, beyond the effects of standard macroeconomic variables. The objective is to empirically examine the relationship between inflation and public sector efficiency, institutional quality, government regime type, interest rates, real economic output, and the nominal exchange rate. The analysis focuses on Nigeria from 1981 to 2024, incorporating key macroeconomic variables by alternating democratic and military regimes, structural reforms, and recurrent inflationary experiences. Methodologically, the study adopts an econometric time-series framework, modelling inflation as a function of public sector efficiency, institutional quality, regime dummy variables, interest rates, real gross domestic product, and the nominal exchange rate. The Autoregressive Distributed Lag (ARDL) approach alongside Granger causality tests, the study assesses both short-run and long-run relationships between institutional factors and economic performance, standard diagnostic tests and robustness checks are employed to ensure the reliability of results. The findings reveal that inefficiencies in the public sector and weak institutional quality significantly exacerbate inflationary pressures, while rigid bureaucratic structures constrain effective policy transmission. Interest rates and exchange rate movements are also found to be important channels through which governance weaknesses translate into persistent inflation. Based on these findings, the study recommends strengthening public sector efficiency through institutional reforms, bureaucratic streamlining, and improved policy coordination alongside monetary measures. It concludes that sustainable inflation control in Nigeria requires an integrated macro-institutional approach that addresses governance and bureaucratic constraints in tandem with conventional economic policy tools.