Asymmetric Fiscal Policy and Economic Growth in Nigeria: A Reexamination

The paper explored the correlation between asymmetric fiscal policy and economic growth in Nigeria in order to unravel whether a nonlinear/unequal nexus exists in the fiscal policy landscape in the country between 1981Q1 and 2023Q4. Annual time series data were decomposed into quarterly form and employed for the analysis. To determine the asymmetric/unequal effect of fiscal policy action on economic growth in the country, the study utilised a nonlinear autoregressive distributed lag (NARDL) methodology for the analysis. The empirical results showed that cointegration exists among the variables in the long run, as indicated by the bounds test. Moreover, the study revealed that a long-run negative significant asymmetric relationship exists between positive fiscal deficit shocks (proxied by fiscal deficits) and economic growth, while positive significant relationships exist between the first and third lagged terms of positive fiscal shocks and economic growth in the short run in the Nigerian economy. The study therefore recommends the need for fiscal restraint in the economic management of the country given the susceptibility of the Nigerian economy to unanticipated exogenous shocks; hence, a small fiscal deficit level must be upheld for stability both in the short run and long run.