The Impact of Fiscal Policy on the Economic Growth of Nigeria

Abstract

This research study examined “Impact of fiscal policy on the economic growth of Nigeria”. The study made use of Johansen Co-integration Test analysis to determine the long run relation between fiscal policy and economic growth of Nigeria. The data was sourced from CBN statistical bulletin for the period of 1990 to 2021. The research findings revealed that there is a linear relationship between Gross Domestic Product and Public Debt, Tax revenue and Government Expenditure, Public debt (PDBT) and Tax Revenue (TAX) were negatively related to GDP while Total Government Expenditure (TGE) is positively related to GDP; PDBT and TAX both have an inverse relationship with GDP meaning that increases in both variables have negative impact or lead to a reduction in GDP. Statistically; the t-statistics of the variables under consideration were significant and the overall estimates of the regression were statistically adequate and therefore shows the acceptance of alternative hypothesis of no co-integration of unstable long run relationship between Fiscal Policy and Economic Growth. It was recommended that; the Nigerian government to increase expenditure on economically viable investment to improve individual income through employment and increased output. Also Government expenditure should be well monitored and ensure that these expenditures are not diversified to individuals’ pockets. The Government should also avoid incessant unproductive debt and ensure the existing debits are properly serviced as and when due.