IMPACT OF FISCAL POLICY INSTRUMENTS ON UNEMPLOYMENT REDUCTION IN NIGERIA

Abstract

This study seeks to analyze the impact of fiscal policy instruments on unemployment in Nigeria from 1986 to 2020. The paper employed annual time series data obtained from central bank of Nigeria (CBN) statistical bulletin. Unemployment was proxied by Unemployment Rate (UMP) while fiscal policy instruments include external debt (EXD), capital expenditure (CPE), recurrent expenditure (RCE) and tax revenue (TRV). Autoregressive Distributed Lag (ARDL) Model was employed to test the long and short run relationship between the study variables. The co-integration bound test result shows that the variables are co-integrated. The result reveals that external debt, recurrent expenditure, and tax revenue have statistically insignificant impact on unemployment in Nigeria but capital expenditure was significance. Based on the findings, we recommended that since fiscal policy instruments alone cannot address the problem of unemployment, government should device and employ other measures such as; the use of monetary policy tools, establishment of a synergy between fiscal and monetary policies in Nigeria.