THE EFFECT OF MACROECONOMIC POLICIES ON ECONOMIC GROWTH IN NIGERIA

ABSTRACT

This study investigates the effect of macroeconomic policies on economic growth in Nigeria. The main objective of the study is to investigate the relationship between monetary and fiscal policies on economic growth in Nigeria. The Ordinary Least Squares method was adopted to analyze the relationship between manufacturing sector and GDP, consumption expenditure, population, exchange rate and inflation and secondary data which spans from 1981 to 2022 from the Central Bank of Nigeria statistical bulletin for real sector and world development indicator was extracted and utilized for empirical analysis. Some forms of pre-estimation tests were carried out in order to obtain satisfactory results. Such tests are the unit root test: test for stationarity, the co-integration test which tests for long run equilibrium relation between the variables of interest of this study. Both the long run and short run estimates (using error correction model), were obtained and interpretations were given according to the results obtained. From the long run result obtained in table 4.6 in the chapter 4, it can be seen that some of the variables met with the apriori expectation as specified in chapter 3. The result shows: government expenditure exhibited a positive but insignificant impact on RGDP, broad money supply exhibited a negative and significant impact on RGDP, foreign direct investment exhibited a positive and significant impact on RGDP, and population exhibited a positive and significant impact on RGDP. Haven discovered from this study the significant positive impact of macroeconomic policies on the economic growth, it is therefore recommended that: To boost the level of economic growth in Nigeria, the government needs to adopt measures such tax reduction or increase in government expenditure to increase the level of aggregate income. The study further recommended that; policy makers should ensure a balance budget, and to work more strongly with the monetary authority without jeopardizing their autonomy; policy makers should ensure that the suitable macroeconomic policies are formulated and implemented towards promoting the economic growth and development; by putting in place good fiscal and monetary policies, this will ensure that the various sectors in the economy are managed properly in order to drive investment and enhance economic growth; the monetary authority should give attention to the regulation of money supply through the open market operation and selective credit. Keywords: Broad Money Supply, Foreign Direct Investment, Government expenditure, Population Growth, RGDP