Fiscal Imbalances, Economic Growth and Macroeconomic Stability in Nigeria.

Abstract

The study was undertaken to assess the interaction between fiscal imbalances, economic growth and macroeconomic stability in Nigeria, with emphasis on its impact on output growth, economic stability as well as its joint effect on the two frontline dependent variables – economic growth and macroeconomic stability. Amongst other techniques of analysis, the Dynamic Ordinary Least Squares (DOLS) was deployed for its features as one of the very unique cointegration techniques with special properties to take care of data-related issues, outliers and other encumbrances in the course of analysis. Employing data from secondary sources [CBN – Statistical Bulletin and World Bank’s World Development Indicators, all various years] to proximate and test fiscal imbalance, economic growth, macroeconomic stability and other controls, analyses were carried out, results obtained and findings, amongst others, was that fiscal imbalances in the Nigerian economy would stifle economic growth and deter macroeconomic stability. Factors like increasing debt volume, current account imbalances, high consumption expenditures, low total revenue, jumping inflation rate and exchange rate and very low productivity were seen as fuelling the outcome. The study recommended that tackling adequate adjustments in those macroeconomic indicators, which will close fiscal imbalance gaps as much as possible, may reverse the outcome, ceteris paribus.