Fiscal Policy & Real Sector Output in Nigeria: 1994- 2019

Abstract

This study examined the effect of fiscal policy implementation on the real sector of the Nigerian economy. An econometric model was estimated using the method of ordinary least squares and data were obtained from the Central Bank of Nigeria (CBN’s) statistical bulletin for the period 1994-2019. The independent variables were government capital expenditure, government recurrent expenditure, and tax revenue, while the dependent variable was the real sector GDP. The study also tested the null hypotheses that fiscal policy has no significant relationship with real GDP From our findings, Capital Expenditure did not have a significant relationship with the Nominal GDP of the Real Sector, which means that changes in Capital Expenditure did not contribute significantly in predicting the growth of the real sector. On the other hand, Recurrent Expenditure and Tax Revenue were statistically significant to the real sector GDP. Also, our results show that all the predictor variables were jointly significant at the 0.05 level. Therefore, the study recommended that measures be put in place for a more coordinated approach to fiscal policy implementation and a sustainable plan to limit and control the level of government borrowing in order to avoid undesirable effects that comes with government crowding out the private sector.