Fiscal Policy And Economic Growth In Nigeria

The study examined the effect of fiscal policy on economic growth in Nigeria from 1986 to 2020. Some econometric tools were employed to explore the relationship between these variables. Fiscal policy was a proxy by total public expenditure, external debt, external reserve, and tax revenue while economic growth was a proxy with Real GDP. The study examines stochastic characteristics of each time series by testing their unit root using Augmented Dickey Fuller (ADF) test. A bound test was employed for the Co- integration(s) was done to exact the long run relationship among the variables of interest. Also, the Autoregressive Distributed Lag Model (ADL) was used to provide complementary information on the dynamic behaviour of the variables in the system and the lost information of the adjusted period to equilibrium. Then, the effect of fiscal policy on economic growth was ascertained using the long run coefficient of Autoregressive Distributed Lag Model. The findings of the analysis show that while Tax revenue, External Debts stock, and External Reserves exact an inverse effect on economic growth, Public Expenditure exact a positive and significant effect on economic growth in Nigeria. The T-statistics show that only external reserve is not statistically significant to explain the economic growth in Nigeria as the P-value of 0.0913 is more than 0.05. The study concluded that fiscal policy has a significant effect on economic growth in Nigeria. The study recommended that government should endeavour to reduce their borrowing from international institutions or bodies by looking inward for other means of financing the government expenditure, this will reduce the proportion of revenue set aside for debt servicing. More so, the government should allocate effectively resources for development such as education, health, and infrastructural sectors of the economy.