EFFECT OF FISCAL POLICY ON ECONOMIC GROWTH IN NIGERIA (1985 TO 2017)

EFFECT OF FISCAL POLICY ON ECONOMIC GROWTH IN NIGERIA (1985 TO 2017)

ABSTRACT

The main objective of the study is to investigate the effect of fiscal policy on economic growth in Nigeria between (1985 to 2017). Four hypotheses were formulated and tested at 0.05 level of significance to guide the study: Capital expenditure has no significant effect on economic growth in Nigeria. Recurrent expenditure has no significant effect on economic growth in Nigeria. Taxation has no significant effect on economic growth in Nigerian and government borrowing has no significant effect on economic growth in Nigeria. Econometric techniques, including Augmented Dicker Fuller and Philip Perron tests for unit roots and ordinary least square (OLS) were used for the data analysis. The result of the study indicates that capital expenditure, recurrent expenditure and tax have positive and significant effect on gross domestic product while government borrowing has negative and insignificant effect on gross domestic product. The study thus concludes that fiscal policy has positive effect on gross domestic product in Nigeria and has helped to improve economic growth and development in Nigeria within the period under review. The study recommends that Government should use an expansionary fiscal policy to encourage increase in investment in Nigeria. Government spending should be channeled to capital projects and social overhead capital that will encourage investment, such as constant electricity supply and good road network as well as channel their expenditure to agricultural sector.