FISCAL POLICY AND ECONOMIC GROWTH IN NIGERIA

ABSTRACT

Fiscal policy concerned with the use of government expenditure and revenue as tools for influencing and contributing to the advancement and thus the economic growth of a country, is seen to have different results on different country’s economy, with different researchers having different opinions on the actual effect fiscal policy has on Economic growth. Some school of thought say positive others say negative, a few say either positive or negative dependent on the mix with the other macroeconomic variables put to work. Thus, the study empirically examined Fiscal Policy and Economic Growth in Nigeria from 1990 to 2021. The study employed the use of Error Correction Model (ECM) to determine the short run and long run relationship between Fiscal policy and Economic growth, to observe the fiscal policy practices in Nigeria and also to study the economic growth trend in Nigeria. The fiscal policy practices in Nigeria, possess actions that do not actually contribute to the Economic growth of Nigeria.  The fiscal variable government expenditure, employed in the study was found to be significant but had a negative relationship with real gross domestic product that was used to proxy Economic growth in Nigeria. Other variables, such as gross fixed capital formation, labour force and money supply were used in the study. The study recommended that government expenditure should be on productive activities and capital projects that will actually improve economic growth and not mismanagement of funds and un-viable projects. Priority should be placed on capital investments that would aid technical advancement and hence economic growth.