Fiscal Policy: Nigerian Experiences from 1960-2012

Abstract

The paper examined the impact of fiscal policy on the growth of the Nigerian economy using time series data from 1960-2012. The study explored secondary data from the Central Bank Statistical Bulletin for the period of 1960 to 2012 and used various econometric analyses and/or statistical analytical (E-view 7.2) method to examine the relationship between fiscal policy and growth. The paper tested the stationarity—through Group unit root test, and stationarity found at first differenced at 5% level of significance. Factor method, Goodness-of- fit summary, VAR and its properties were tested. Also, the Co-integration Technique and Pairwise-Granger Causality were employed in this study to test and determine the long-run relationship among the variables examined. From the result of the empirical findings, it was discovered that fiscal policy has a direct relationship with growth. The paper however recommended that among others the government should ensure fiscal policy’s effectiveness in such a way as achieving economic growth. Government should increase its aggregate expenditure such a way that the citizens will benefit from it. Government should ensure that monetary policy is supplementary tool to fiscal policy in order to stabilize the economy. Government should ensure that inflation rate is maintained at single-digit level to enable the private investors to have conducive atmosphere for production of goods for export. Government should reduce the cost of domestic borrowing (i.e., interest rate) to enable both the domestic and foreign potential investors have an access to investible funds. Government should stabilize the foreign exchange market-where the foreign currencies are traded. Hence economic growth.