Despite decades of substantial government spending and policy reforms, persistent macroeconomic instability and fiscal imbalances have continued to challenge Nigeria’s economic growth. The country’s fiscal policy has been characterised by inefficient resource allocation resulting in volatile growth outcomes and heightened vulnerability to external shocks. Focusing on the size of government, this research investigated the existence of Armey curve evidence in Nigeria. Grounded in neoclassical growth theory and the Armey curve framework, the research addresses nonlinear growth dynamics. Utilising nonlinear autoregressive distributed lag (NARDL) models, wavelet coherence analysis, and threshold regression, the study analyses disaggregated fiscal data from the Central Bank of Nigeria. Key findings reveal a long-term negative correlation between total government expenditure (% of GDP) and economic growth, driven by crowding-out effects. The Armey curve hypothesis is validated by identifying an optimal government size of 22–24% of GDP, beyond which growth diminishes. Threshold regression highlights diminishing returns to capital expenditure beyond 7.3% of GDP. The research concludes that Nigeria’s fiscal architecture is misaligned with sustainable growth. It is recommended that government should gradually reduce government size to 22% (optimal threshold) of GDP by privatising non-strategic public enterprises and deregulating.