Examining the Fiscal Policy-Poverty Reduction Nexus in Nigeria

Abstract

Using a multiple regression analysis in the autoregressive distributed lag framework with ECM we include three major components of fiscal policy variables (Government capital expenditure, Government recurrent expenditure and Government Budget Deficit) as regressors and the rate of poverty in Nigeria as the dependent variable, this study explored the potency of fiscal policy in Nigeria in addressing the seemingly endemic poverty scourge from 1980-2011. Findings indicate that the level of government capital expenditures in Nigeria does not reduce the level of poverty in the country over the period of time covered by the study. Although the ECM result, which shows the speed of adjustment of the model from the short run to the long run equilibrium, is on the average, yet the economy did not show any sign of much potency in using the selected fiscal policy variables to tackle the menace of poverty in Nigeria. The study recommends that government should intensify action in implementing effective fiscal policies to ameliorate the level of poverty conditions in Nigeria.