Fiscal Policy and the Nigerian Economy: An Econometric Review
The paper examines fiscal policy regulations as a tool for enhancing economic growth and poverty reduction in Nigeria using data covering the period 1981-2014 obtained from Central bank of Nigeria and World Development Indicators. The study employed econometric methods of Ordinary Least Square (OLS), Augmented Dickey-Fuller (ADF) Unit Root test, Johansen Co-integration test and Vector auto-regression (VAR) to analyze data empirically. Results from data analyzed suggest that tax revenue, external borrowings, government domestic debt and government capital expenditure have not contributed significantly to economic growth and poverty reduction in Nigeria. However, government recurrent expenditure was found to be statistically significant and impacted on the gross domestic product per capita during the study period. This may be attributed to the reason that recurrent expenditure has a deep rooted and faster influence on growth than capital expenditure. Capital expenditure, which is a long-term expenditure, is more prone to misappropriation and theft, and also could be less growth enhancing. The empirical result is consistent with and strongly upheld the Keynesian’s view that government expenditure causes economic growth.