Fiscal Policy and The Nigerian Economy: an Empirical Analysis (1961-2015)

Reference Code: C071

ABSTRACT

This study is aimed to investigating the relationship that exists between fiscal policy and economic growth in Nigeria. The study which covered a period of 50 years from 1961 to 2011 proxied fiscal policy with government revenue and expenditure while economic growth was represented as gross domestic product. In order to achieve the objectives of the study, secondary data was collected from the Central Bank of Nigeria annual statistical bulletin and analyzed using multiple regression analysis, Augmented Dickey Fuller Test and Johannsen Co-Integration Test. The findings of our data analysis revealed that there was an overall significant relationship between fiscal policy tools of government expenditure and government revenue and gross domestic product in Nigeria. Furthermore, we find a long-term relationship between gross domestic product and the fiscal policy variables of government revenue and expenditure. Given our findings, we conclude that: Increases in Government Revenue will normally lead to growth in the economy. This is because the increase in government revenue will lead to increased spending in investment in infrastructure and other growth promoting activities. It will also lead to increase in the income of the populace. We also conclude that increased Government Expenditure leads economic growth by stimulating increase in economic activities. There is the proviso of course that the government spending activities must be in activities and sectors that have the ability to drive growth. On the basis of our findings, we make the following recommendations: Fiscal policy should give priority attention to capital and public investments by making them of higher proportion in gross government expenditure, thereby creating more jobs and enhancing the quality of public spending and the attainment of sustainable growth and development. Government macro-economic policies should focus on diversification of the economy to enhance the performance of the non-oil sector. Finally, Government fiscal policy should refocus and redirect government expenditure towards production of goods and services so as to enhance GDP growth.

INTRODUCTION

................. The term fiscal policy has conventionally been associated with the use of taxation and public expenditure to influence the level of economic activities. The implementation of fiscal policy is essentially routed through government’s budget. The budget is, therefore, more than a plan for administering the government sector. It both reflects and shapes a country’s economic life. In fact, the most important aspect of a public budget is its use as a tool in the management of a nation’s economy (Omitogun and Ayinla, 2007).

Fiscal policy deals with government deliberate actions in spending money and levying taxes with a view to influencing macro-economic variables in a desired direction. This includes sustainable economic growth, high employment creation and low inflation (Encarta Encyclopedia, 2004). Thus, fiscal policy aims at stabilizing the economy. Increases in government spending or a reduction in taxes tend to pull the economy out of a recession; while reduced spending or increased taxes slow down a boom (Dornbusch and Fischer, 1990).

Olawunmi and Tajudeen (2007) opine that fiscal policy has conventionally been associated with the use of taxation and public expenditure to influence the level of economic activities. Fiscal policy is mostly to achieve macroeconomic policy; it is to reconcile the changes which government modifies in taxation and expenditure, programmes or to regulate the full employment, price and total demand to be used through instruments such as government expenditures, taxation and debt management (Hottz-Eakin, Lovely and Tosin, 2009).

As noted by Anyanwu (1993), the objective of fiscal policy is to promote economic conditions conducive to business growth while ensuring that any such government actions are consistent with economic stability. From the foregoing, it is clear that if fiscal policy is used with circumspection and synchronized with other measures, it will likely smoothen out business cycles and lead to economic growth and stability. ............... FOR ACCESS TO THE FULL PROJECT WORK, USE THE ORDER NOW! BUTTON BELOW

TABLE OF CONTENT

CHAPTER ONE
INTRODUCTION
1.1 BACKGROUND OF THE STUDY 1
1.2 STATEMENT OF THE PROBLEM 2
1.3 AIMS OF THE STUDY 5
1.4 RESEARCH QUESTIONS 6
1.5 RESEARCH HYPOTHESES 7
1.6 SIGNIFICANCE OF THE STUDY 8
1.7 SCOPE AND LIMITATIONS OF THE STUDY 9

CHAPTER TWO
REVIEW OF RELATED LITERATURE
2.0 INTRODUCTION 10
2.1.1 THEORETICAL FRAMEWORK 11
2.1.2 STRUCTURE AND TRENDS IN FISCAL POLICY OPERATIONS IN NIGERIA 16
2.1.3 STRUCTURE AND TREND OF GOVERNMENT REVENUE 16
2.1.4 STRUCTURE AND TREND OF GOVERNMENT EXPENDITURE 20
2.1.5 TAXATION AND FISCAL REGULATIONS IN NIGERIA 28
2.4 REVIEW OF PREVIOUS EMPIRICAL STUDIES 40

CHAPTER THREE
RESEARCH METHODOLOGY
3.0 INTRODUCTION 51
3.1 RESEARCH DESIGN 51
3.2 SAMPLE PROCEDURE/DATA COLLECTION METHOD 52
3.4 MODEL SPECIFICATION 52
3.5 OPERATIONAL MEASURES OF VARIABLES 54
3.5.1 Gross Domestic Product 54
3.5.2 Federal Government Revenue 55
3.5.3 Federal Government Expenditure 55

CHAPTER FOUR
DATA PRESENTATION AND ANALYSIS
4.0 INTRODUCTION 56
4.1 DATA PRESENTATION 56
4.2 DATA ANALYSES 58
4.4 HYPOTHESES TESTING 60
4.5 DISCUSSION OF FINDINGS 61

CHAPTER FIVE
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.1 SUMMARY 64
5.2 CONCLUSIONS 64
5.3 RECOMMENDATIONS 65
BIBLIOGRAPHY 67
APPENDICES 73

Reference Code: C071
Reference Code: C071

85 Pages
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