IDEAS home Printed from https://ideas.repec.org/a/mgs/ijoied/v8y2022i5p25-43.html
   My bibliography  Save this article

Fiscal Policy Tools and Economic Growth in Nigeria

Author

Listed:
  • Kanu Success Ikechi

    (Department of Banking and Finance, Faculty of Social and Management Sciences, Kingsley Ozumba Mbadiwe University (KOMU), Ideato, Imo State, Nigeria)

  • Amu Christian Ugwueze

    (Department of Accounting, Faculty of Social and Management Sciences, Kingsley Ozumba Mbadiwe University (KOMU), Ideato, Imo State, Nigeria)

  • Afolayan Segun Matthew

    (Department of Accounting, Faculty of Social and Management Sciences, Kingsley Ozumba Mbadiwe University (KOMU), Ideato, Imo State, Nigeria)

Abstract

Researchers have come up with varying opinions on the impact of fiscal policy tools on the economic growth of many nations. While some are of the view that fiscal policy tools have positive relationship with economic growth, others posit that it has a negative impact while a third group are of the opinion that its impact could either be positive or negative depending on how it is harnessed with other macro-economic variables and yet a fourth school of thought has emerged. They are of the opinion that fiscal policy tools could have a little but not significant impact on the economic growth of any given nation. Thus this study is set to lend its voice and opinion on this discuss with emphasis on the Nigerian economy using a time series data for the period 1999-2020. The data were analyzed using Ordinary Least Square method and a Vector Auto regression Analysis. In the model, Real GDP (taken as dependent variable) was regressed on tax revenues, capital and recurrent expenditures. Other independent variables include deficit financing, external and domestic debts. Findings of study indicate that in the short run, deficit financing, domestic debt and recurrent expenditures all had significant positive relationship with economic growth in Nigeria; while there exists a significant negative relationship between external debts and real GDP. Capital expenditure and tax revenues did not have a significant relationship with economic growth in Nigeria in the short run. In the long run, the earlier outcomes fizzled out as only the lagged value of RGDP, taken as an explanatory variable was found to be positively significant. From the foregoing analysis, it was established that fiscal policy tools did not sustain a significant relationship with economic growth in Nigeria in the long run, thus pitching our tent with the fourth school of thought. Fiscal policy tools are not enough to pilot the economic ship of Nigeria. The study therefore recommends that government should use fiscal policy instruments to complement its sister strategy – the monetary policy tools to promote stability in the Nigerian economy. A good mix of fiscal and monetary policy tools could help in the formulation and implementation of sound economic policies; the impact of which will be appreciated from the standpoint of how rapidly and effectively it fosters, innovates or facilitates economic growth in Nigeria.

Suggested Citation

  • Kanu Success Ikechi & Amu Christian Ugwueze & Afolayan Segun Matthew, 2022. "Fiscal Policy Tools and Economic Growth in Nigeria," International Journal of Innovation and Economic Development, Inovatus Services Ltd., vol. 8(5), pages 25-43, December.
    • Handle: RePEc:mgs:ijoied:v:8:y:2022:i:5:p:25-43
    DOI: 10.18775/ijied.1849-7551-7020.2015.85.2003
    as

    Download full text from publisher

    File URL: https://researchleap.com/wp-content/uploads/2023/01/03_Fiscal-Policy-Tools-and-Economic-Growth-in-Nigeria.pdf
    Download Restriction: no
    File URL: https://researchleap.com/fiscal-policy-tools-and-economic-growth-in-nigeria/
    Download Restriction: no
    File URL: https://libkey.io/10.18775/ijied.1849-7551-7020.2015.85.2003?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Kneller, Richard & Bleaney, Michael F. & Gemmell, Norman, 1999. "Fiscal policy and growth: evidence from OECD countries," Journal of Public Economics, Elsevier, vol. 74(2), pages 171-190, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Jing Xing, 2011. "Does tax structure affect economic growth? Empirical evidence from OECD countries," Working Papers 1120, Oxford University Centre for Business Taxation.
    2. Canavire-Bacarreza, Gustavo & Martínez-Vázquez, Jorge & Vulovic, Violeta, 2013. "Taxation and Economic Growth in Latin America," IDB Publications (Working Papers) 4583, Inter-American Development Bank.
    3. Yoshiyasu Ono, 2011. "The Keynesian Multiplier Effect Reconsidered," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(4), pages 787-794, June.
    4. Zheng, Xinye & Li, Fanghua & Song, Shunfeng & Yu, Yihua, 2013. "Central government's infrastructure investment across Chinese regions: A dynamic spatial panel data approach," China Economic Review, Elsevier, vol. 27(C), pages 264-276.
    5. Marco Alfò & Lorenzo Carbonari & Giovanni Trovato, 2020. "On the Effects of Taxation on Growth: an Empirical Assessment," CEIS Research Paper 480, Tor Vergata University, CEIS, revised 08 May 2020.
    6. Gustavo Marrero, 2010. "Tax-mix, public spending composition and growth," Journal of Economics, Springer, vol. 99(1), pages 29-51, February.
    7. Sanz Labrador, Ismael & Sanz-Sanz, José Félix, 2013. "Política fiscal y crecimiento económico: consideraciones microeconómicas y relaciones macroeconómicas," Macroeconomía del Desarrollo 5367, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    8. Lucas Bretschger, 2003. "Growth in a Globalised Economy: The Effects of Capital Taxes and Tax Competition," CER-ETH Economics working paper series 03/24, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    9. Sabrina Auci & Laura Castellucci & Manuela Coromaldi, 2021. "How does public spending affect technical efficiency? Some evidence from 15 European countries," Bulletin of Economic Research, Wiley Blackwell, vol. 73(1), pages 108-130, January.
    10. François Facchini & Mickaël Melki, 2012. "Political Ideology and Economic Growth in a Democracy: The French Experience, 1871 - 2009," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00662838, HAL.
    11. Crafts, Nicholas & Toniolo, Gianni, 2008. "European Economic Growth, 1950-2005: An Overview," CEPR Discussion Papers 6863, C.E.P.R. Discussion Papers.
    12. Åsa Johansson, 2016. "Public Finance, Economic Growth and Inequality: A Survey of the Evidence," OECD Economics Department Working Papers 1346, OECD Publishing.
    13. Amit Nandan & Hrushikesh Mallick, 2022. "Do growth-promoting factors induce income inequality in a transitioning large developing economy? An empirical evidence from Indian states," Economic Change and Restructuring, Springer, vol. 55(2), pages 1109-1139, May.
    14. Torberg Falch & Justina AV Fischer, 2008. "Does a generous welfare state crowd out student achievement? Panel data evidence from international student tests," TWI Research Paper Series 31, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
    15. Chiara DEL BO, 2009. "Recent advances in public investment, fiscal policy and growth," Departmental Working Papers 2009-25, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
    16. Luc Jacolin & Joseph Keneck Massil & Alphonse Noah, 2021. "Informal sector and mobile financial services in emerging and developing countries: Does financial innovation matter?," The World Economy, Wiley Blackwell, vol. 44(9), pages 2703-2737, September.
    17. Peren Arin, K. & Koray, Faik & Spagnolo, Nicola, 2015. "Fiscal multipliers in good times and bad times," Journal of Macroeconomics, Elsevier, vol. 44(C), pages 303-311.
    18. Sefa Awaworyi Churchill & Mehmet Ugur & Siew Ling Yew, 2017. "Does Government Size Affect Per-Capita Income Growth? A Hierarchical Meta-Regression Analysis," The Economic Record, The Economic Society of Australia, vol. 93(300), pages 142-171, March.
    19. Hassan, Mahmoud & Oueslati, Walid & Rousselière, Damien, 2020. "Environmental taxes, reforms and economic growth: an empirical analysis of panel data," Economic Systems, Elsevier, vol. 44(3).
    20. Osterloh, Steffen, 2018. "How do politics affect economic sentiment? The effects of uncertainty and policy preferences," VfS Annual Conference 2018 (Freiburg, Breisgau): Digital Economy 181614, Verein für Socialpolitik / German Economic Association.

    More about this item

    Keywords

    Taxation; Tax revenues; Capital Expenditure; Recurrent expenditures; Deficient financing; Domestic debt; External debt and Transfers;
    All these keywords.

    JEL classification:

    • M00 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - General - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mgs:ijoied:v:8:y:2022:i:5:p:25-43. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Bojan Obrenovic (email available below). General contact details of provider: https://researchleap.com/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.