IMPACTS OF FISCAL POLICY COMPONENTS ON ECONOMIC GROWTH IN NIGERIA: AN EMPIRICAL TREND ANALYSIS

Abstract

The role of fiscal policies in the development of emerging economies has been a major source of concern in economic literature. Majority of studies in this area have however, concentrated on the industrialized countries of the Western World, with little or no reference to the emerging economies of the developing countries. This study aims therefore, at bridging such gap by looking at the impact of fiscal policy components and expenditures on them on growth of the Nigerian economy. The guiding question is on whether federal government expenditures on fiscal components have significant impacts on growth of the Nigerian economy.
Methodologically, the study began by examining the characteristics of the relevant time-series using the unit root tests of stationary and co-integration tests. Our analysis was based on three models: a baseline model; a log linear model; and, a lagged model, each of which was designed to achieve the aim of this study. The analytical results suggest as follows: (i) existence of unit
root problems hence, non-stationary time series on the relevant regression variables; (ii) nonpositive impacts of federal expenditures on economic services and transfer payments on growth of the Nigerian economy; and (iii) observed positive impacts of federal expenditures on administration, as well as social and community services on economic growth. Based on these
observations, the study recommends as follows: first, institution of effective and implementable political, social, and economic stabilization policy programmes; second, an in-depth scholarly study on the relationship between government expenditures on such economic services as agriculture, construction, transport and communication and economic progress in Nigeria; and,
the federal government to lay special emphasis on administrative, social and community services in its fiscal policies, as these fiscal components have potential inputs to development of the Nigerian economy