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Foreign Aid, Fiscal Optimality and Economic Growth in Nigeria

Author

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  • Olufemi Saibu

    (Department of Economics, University of Lagos)

  • Felix Obioesio

    (Department of Economics, University of Lagos)

Abstract

The main thrust of this study has been to provide empirical illuminations to the debate on the effectiveness of foreign aid in driving sustainable growth and development. Using an extended Barro style model of aid-augmented government expenditure and economic growth, an analytical model is derived to explain this nexus for Nigeria. To obtain estimates free from endogeneity bias; the methodology adopted for the estimation and empirical analysis is based on the IV-2SLS approach. The result from this exercise well conforms to the argument that foreign aid is indeed instrumental to the growth process of Nigeria. The result for our second objective also validates the conventional debate that the growth effects of foreign aid is in most cases conditional on some “good” macroeconomic policy environment. The implication of our findings is that adequate policy framework and institutional improvement can serve as a veritable path through which foreign aid can most contribute to growth in Nigeria.

Suggested Citation

  • Olufemi Saibu & Felix Obioesio, 2017. "Foreign Aid, Fiscal Optimality and Economic Growth in Nigeria," SPOUDAI Journal of Economics and Business, SPOUDAI Journal of Economics and Business, University of Piraeus, vol. 67(4), pages 85-99, October-D.
    • Handle: RePEc:spd:journl:v:67:y:2017:i:4:p:85-99
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    References listed on IDEAS

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    1. Tiamiyu, Kehinde A., 2019. "Foreign aid and economic growth: Does non-linearity matter?," MPRA Paper 108588, University Library of Munich, Germany, revised Jul 2109.

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    More about this item

    Keywords

    Foreign Aid; Fiscal Optimality; Economic Growth; IV-2SLS;
    All these keywords.

    JEL classification:

    • F35 - International Economics - - International Finance - - - Foreign Aid
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • O23 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Fiscal and Monetary Policy in Development

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