Fiscal Policy and Macroeconomic Stability in Nigeria 1980 – 2013

ABSTRACT

This study examines the impact of government fiscal policy measures on major macroeconomic goals in Nigeria using annual time series data spanning 1980 to 2013. The theoretical background and evaluation of this study was traced from the classical economists to the Keynesians and the neo-classical economists. The ordinary least square approach was adopted for the study. The study employed the co-integration and error correction technique to establish the long run relationship between variables in the models. Data for the study were obtained from secondary sources. Four hypotheses were formulated and tested using the techniques for data analysis. The first hypothesis was rejected. The second and third hypotheses were accepted; while the fourth hypothesis was rejected in the short run and not in the long run. It was found out from the study that fiscal policies increased growth (GDP) but its long run effects were ineffective. Project executed by the government, aimed at creating employment opportunities, have not been productive; debts have strangulated employment. Fiscal policies have not affected inflation rates; and they have encouraged large importations thereby creating deficits in its balance of payments. These were attributed to the lack of strategic planning templates inherent in successful fiscal planning and implementation in stabilizing the economy. Thus, it was concluded that the Nigerian government should ensure that its fiscal operations are effective as macroeconomic management tools. Finally, it was recommended that the government should direct its focus on improving capital expenditures, government’s Internally Generated Revenue (IGRs) should be well-coordinated by enhancing adequate domestic resource mobilization, government’s domestic and external borrowings should be geared into productive sectors of the economy to create adequate job opportunities, and the government should formulated and implement policies aimed at reducing huge reliance on foreign goods.