IMPACT OF FISCAL POLICY ON ECONOMIC PERFORMANCE INNIGERIA 1990-2024
Abstract
ABSTRACT
This study examines the impact of fiscal policy on economic growth in Nigeria over the period 1990 to 2024. The study specifically seeks to determine the effect of government expenditure, government total revenue, and domestic debt on economic performance in Nigeria. Annual time series data on Gross Domestic Product (GDP), Government Expenditure (GEX), Government Total Revenue (GTR), and Domestic Debt (DOM) were obtained from the Central Bank of Nigeria (CBN) Statistical Bulletin and World Development Indicators (WDI). The study employed the Autoregressive Distributed Lag (ARDL) approach to estimate both the short-run and long-run relationships among the variables. The results revealed that government expenditure has a positive and statistically significant effect on economic growth both in the short and long run, while government total revenue also displayed a positive relationship but with varying significance in the short run. Conversely, domestic debt exhibited a negative and significant effect on economic performance, indicating that excessive reliance on debt financing could hinder growth. The diagnostic tests confirmed that the models were free from serial correlation, heteroskedasticity, and instability problems, thereby validating the robustness of the estimated results. The study therefore concludes that fiscal policy, particularly strategic government spending and revenue mobilization, remains a critical tool for promoting economic growth in Nigeria. It recommends that policymakers should prioritize productive expenditures in infrastructure, education, and health, adopt efficient tax policies to enhance revenue without discouraging investment, and limit reliance on domestic borrowing. Furthermore, strengthening fiscal discipline, promoting private sector participation, and maintaining macroeconomic stability will complement government efforts, reduce vulnerability to fiscal shocks, and sustain inclusive and long-term economic growth in Nigeria.
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