Fiscal Policy and Economic Growth in Nigeria

Abstract

This article aims at determining the impact of various components of fiscal policy on the Nigerian economy. We simply used descriptive statistics to show contribution of government fiscal policy to economic growth, and to ascertain and explain growth rates, and an ordinary least square (OLS) in a multiple form to ascertain the relationship between economic growth and government expenditure components after ensuring data stationarity. Findings revealed that total government expenditures have tended to increase with government revenue, with expenditures peaking faster than revenue. Investment expenditures were much lower than recurrent expenditures evidencing the poor growth in the country's economy. Hence, there is some evidence of positive correlation between government expenditure on economic services and economic growth. Therefore, in public spending, it is important to note that the effectiveness of the private sector depends on the stability and predictability of the public incentive framework, which promotes or crowds out private investment. Keywords fiscal policy, economic, growth, public expenditure, and components 2 SAGE OpenPoverty reduction has been a major goal of various governments. This is evidenced by the fact that various governments have introduced different programs to reduce poverty levels. Examples are Nigerian Directorate of Employment (NDE) introduced in 1989 and the National Poverty Eradication Programme (NAPEP) introduced in 2001. Per capita income is the major index for measuring poverty level. Per capita income in Nigeria has been increasing steadily from year 2000 when it was N39,657 to year 2010 when it reached N71,131 (IMF, 2011). This increase in per capital income has not led to an increase in the standard of living of the citizens because of the increase in the cost of goods and services.The rising profile of Nigeria's indebtedness is a sour point in the public finance management and speaks volumes of the fiscal discipline of political actors' attitude to the sovereignty of Nigeria. According to Nwankwo (2010), Nigeria debt profile was US$32.5 billion by September 2010, that is, N5,241,667 million by September 2010. In year 2000, the total outstanding debt of Nigeria was N3,995,638 million. There continued to be an upward trend until in 2006 when it came down to N3,177,409 million because of debt cancelation agreement between Nigeria and Paris Club (Okwo, 2010). Thereafter, it started rising again and reached N5,241,667 million in 2010. The expenditure pattern of Nigeria has been on the increase. In 2000, the total expenditure was N701,059 million. It has increased steadily, and in 2010, it was N4,199,429 million.Generally, increase in expenditure should lead to reduced unemployment rate but in Nigeria, the reverse is the caseAs total expenditure increases, rate of unemployment increases. This is because a greater percentage of the total expenditure is channeled to recurrent expenditure, and the proportion is worsening. In 2000, the percentage of the total expenditure spen...

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