FISCAL POLICY AND ECONOMIC GROWTH IN NIGERIA (1981 – 2023)
Abstract
ABSTRACT
Given Nigeria’s reliance on fiscal policy for economic development amidst various challenges, this research aimed to provide empirical evidence on the significance of these fiscal variables in shaping economic outcomes. Hence, this study examined the impact of fiscal policy on economic growth in Nigeria, focusing on key fiscal variables such as taxation, government expenditure (current and capital), public debt, and their long- and short-term effects on the country's economic growth. The study covered data from 1981 to 2023, and the analysis was conducted using the Autoregressive Distributed Lag (ARDL) model, complemented by diagnostic tests to ensure robustness. The results of the study indicate that, in both the short and long run, current expenditure and public debt have a significant impact on Nigeria’s economic growth, with current expenditure negatively affecting growth in the short run and public debt positively influencing it. Labor force participation (LNLAB) also plays a crucial role in promoting economic growth, with significant positive contributions in both periods. On the other hand, taxation (LNTAR), non-tax revenue (LNNTR), and capital expenditure (LNCAE) did not exhibit significant effects in either the short or long run, suggesting that these variables may not be as impactful as other fiscal policies in influencing Nigeria's economic growth. Furthermore, capital expenditure (LNCAP) showed significant effects in the long run, where it positively contributed to economic growth, highlighting its long-term importance. Based on these results, the study recommended targeted fiscal policies, with an emphasis on efficient capital expenditure and managing public debt. The study contributes valuable insights to the policy discourse on fiscal management in Nigeria and offers recommendations for enhancing growth through strategic fiscal interventions.
Keywords: Taxation, Public Debt, Government Expenditure, Capital Formation, Labor Force Participation, Economic Growth, ARDL, Nigeria.
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