Abstract
This study went into much neglected area of research; relationship between fiscal policy instruments and performance of banks in Nigeria. Various finametric tools were used to analyze data collected from Nigerian Deposit Insurance Cooperation and Central Bank of Nigeria for period of 1989 to 2018 inclusive. Resounding empirical findings were made as follows; Bank performance is autoregressive. That suggests that performance of banks in the past cannot be predicting future bank performance. It was conspicuously observed that Capital Expenditure, Non-Oil Revenue and Domestic Debt have positive and significant relationship with bank performance, while Recurrent Expenditure Domestic Debt afterwards negatively and significantly impact bank performance. It was also found that fiscal policy variables (Capital Expenditure, Recurrent Expenditure, Non-Oil Revenue and Domestic Debt) significantly impact bank performance both in the short run and long run. Since fiscal policy variables are found to exert significant impact banks’ performance in Nigeria, the researchers suggests to Federal government of Nigeria as a matter of urgency reconsiders the operation of Treasury Single Account. It is the view of the researchers that the Treasury Single Account be operated through deposit money banks by domesticating various Ministries, Departments and Agencies (MDAs) account with the deposit money banks. Keywords : Bank Performance, Fiscal Policy, ARDL, Nigeria. DOI: 10.7176/RJFA/11-8-12 Publication date: April 30 th 2020
Highlights
During the classical era, government fiscal policy was understood to mean all the activities of government aimed at procurement or raising and spending or distribution of money to pay for the cost of operating government, with no consideration for employment and output as it is today
Njoku (2009) added that though the ultimate aim of fiscal policy is the long run stabilization of the economy, yet it can only be achieved by moderating short run economic fluctuations
The results show Return on Assets (ROA), Non-Oil Revenue (NOR) and DEBT are stationary at level while Capital Expenditure (CEX) and Recurrent Expenditure (REX) are stationary or integrated at order one
Summary
Government fiscal policy was understood to mean all the activities of government aimed at procurement or raising and spending or distribution of money to pay for the cost of operating government, with no consideration for employment and output as it is today. Since the great depression of 1930s, the term fiscal policy has been applied to refer to those activities of general finance, which have to do with the reduction of economic instability and the stimulation of employment and long run economic growth. Fiscal policy may be viewed as an articulated framework detailing how fiscal policy instruments can be varied by government to influence the long run growth of the economy, especially the growth rates of employment and national income (Onoh, 2007). Onoh (2007) observe that if the instruments of expenditure and receipt are properly synchronized with other macroeconomic policy instruments from the monetary, institutional and the direct economic interventions the arena economy becomes stabilized and the macroeconomic objectives of higher levels of employment, national income and balance of payment equilibrium become realized to a large extent. Fiscal policy should be synchronized with other economic policies and should not be at variance with them
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