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Fiscal policy, interest rate and the manufacturing sector performance in Nigeria

Author

Listed:
  • Edem Effiong, Ubong
  • Justin Ukere, Idongesit
  • Polycarp Ekpe, John

Abstract

In this paper, the influence of fiscal policy (government expenditure and taxation) and interest rate on the manufacturing sector of the Nigerian economy was explored for the period 1981 to 2021. The study utilized the autoregressive distributed lag (ARDL) model approach since some of our variables were integrated at level and others at first difference, and the bounds test reporting the existence of long run relationship in the model. Findings of the study in tudy indicated that in the short run, government expenditure and its one-period lag exerted a negative and significant influence on manufacturing sector performance; value added tax exerted a positive and significant effect on manufacturing sector performance while its one-period lag exerted a negative and significant effect; and interest rate exerted a positive and significant effect on manufacturing sector performance. In the long run, government expenditure put forth a negative but insignificant effect on manufacturing sector performance; while value added tax and interest rate exert positive and significant effect. In the disaggregated model, recurrent expenditure exerts a negative and significant effect; capital expenditure exerted a positive and significant effect; value added tax exerted a negative and significant effect; and interest rate put forth a positive and significant influence on manufacturing sector performance. The study recommended that there is need for a reduction in the cost of governance as a huge proportion of public spending is used in running the government other than being utilized in stirring critical sectors that could stir manufacturing sector performance.

Suggested Citation

  • Edem Effiong, Ubong & Justin Ukere, Idongesit & Polycarp Ekpe, John, 2024. "Fiscal policy, interest rate and the manufacturing sector performance in Nigeria," MPRA Paper 120679, University Library of Munich, Germany, revised 30 Mar 2024.
    • Handle: RePEc:pra:mprapa:120679
    as

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    References listed on IDEAS

    as
    1. N. Gregory Mankiw, 2005. "The Savers-Spenders Theory of Fiscal Policy: Corrigendum," American Economic Review, American Economic Association, vol. 95(5), pages 1752-1752, December.
    2. Agwu Sunday Okoro & Augustine Ujunwa & Ezike Ifeoma Betty & Ikenna Franklin Chijioke & Angela Ifeanyi Ukemenam, 2017. "Effects of Fiscal and Monetary Policies on the Nigerian Manufacturering Sector," Journal of Finance and Investment Analysis, SCIENPRESS Ltd, vol. 6(1), pages 1-1.
    3. Olanipekun Emmanuel Falade, 2020. "Fiscal Policy and Sectoral Output Performance in Nigeria," International Journal of Research and Scientific Innovation, International Journal of Research and Scientific Innovation (IJRSI), vol. 7(1), pages 65-75, January.
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    JEL classification:

    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence

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