Fiscal Policy and Macroeconomic Performance in Nigeria from 1980 to 2018
Chapter One
OBJECTIVE OF THE STUDY
The objectives of the study are;
- To ascertain the relationship between fiscal policy and macroeconomic performance
- To find out how the policies have impacted on employment and unemployment in Nigeria.
- To find out the extent to which the policies have helped to improve the investment climate in Nigeria
- To ascertain the extent to which the policies have reduced inflation in the country
CHAPTER TWO
REVIEW OF RELATED LITERATURE
INTRODUCTION
Various researchers have written on different aspects of fiscal policy especially as it relates to and affects the macroeconomics of the economy. Fiscal policy is defined as how a government adjusts its levels of spending to monitor and influence a nation’s economy (Reem, 2009). The policy is used along with monetary policy in different combinations to direct a country’s goals. According to Reem (2009), fiscal policy is based on the theories of British economist John Magnard Keynes whose theory states that governments can influence macroeconomic productivity levels by increasing or decreasing tax levels and public spending. This influence, in turn, curbs inflation, increases employment, and maintains a healthy value of money. Various researchers have written on different aspects of fiscal policy especially as it relates to macroeconomic productivity levels. The studies of the effect of public expenditure on the economy have shown a positive relationship between Ram(1996); Barro(1991); Easterly and Rebelo(1993) Otani and andVillanvera(1990) Komain et (2007); Ranjan and Sharma(2008); Cooray(2009); Wu et al (2010); Nworji et al(2012) while other like Abu-Bader and Abu-Qarn(2003); Laudau(1986) found a negative relationship. However, kormendi and Megure (1995) could not find any relationship. Adefeso and Mobalaji (2010) wrote on the fiscal-monetary policy and economic growth in Nigeria. Their major objective was to re-estimate and re-examine the relative effectiveness of fiscal and monetary policies on economic growth in Nigeria using annual data from 1970-2007. The Error correction mechanism and co-integration technique were employed to analyze the data and draw policy inferences. Their result showed that the effect of monetary policy is much stronger than fiscal policy. They suggested that there should be more emphasis and reliance on monetary policy for economic stabilization in Nigeria. In the same vein, Olawunmi and Ayinka (2007) examined the contribution of fiscal policy in the achievement of sustainable economic growth in Nigeria using a slow growth model estimated with the use of the ordinary least square method, It was found that fiscal policy has not been effective in the area of promoting sustainable economic growth in Nigeria. They however, stated that factors such as wasteful spending, poor policy implementation, and lack of feedback mechanism for implemented policy evident in Nigeria which is indeed capable of hampering the effectiveness, of fiscal policy have made it impossible to come up with such a conclusion. Mueller (2011) investigated economic, political, and institutional constraints to fiscal policy implementation in sub-Saharan Africa. It was found that planned fiscal adjustments or expansions are less likely to be implemented. The larger they are, the more inaccurate the growth forecasts they are based on. The finding supports ongoing efforts in the region to improve the quality and timeliness of economic data, enhance forecasting capacity, adopt realistic fiscal plans, and strengthen governance, budgetary institutions, and public financial management procedures. Ogbole, Amadi, and Essi (2011) wrote on fiscal policy: and its impact on economic growth in Nigeria (1970-2006). The study involves a comparative analysis of the impact of fiscal policy on economic growth in Nigeria during regulation and deregulation periods. An econometric analysis of time series data from the Central Bank of Nigeria was conducted. Results showed that there is a difference in the effectiveness of fiscal policy in stimulating economic growth during and after a regulation period. Appropriate policy mix, prudent public spending, setting of achievable fiscal policy targets, and diversification of the nation’s economic base, among others, were recommended in the same vein but covering a shorter period Adeoye (2011) analyzed the impact of fiscal policy on economic growth in Nigeria in 1970-2002. The finding shows that public investment negatively affects output growth implying that public expenditure has a crowding-out effect on private investment Chuku (2010) uses quarterly data to explore the monetary and fiscal policy interactions in Nigeria between 1970 and 2008. The paper examines the nature of fiscal policies in Nigeria using the vector auto-regression (VAR) model. The evidence indicates that monetary and fiscal policies in Nigeria have interacted in a counteractive manner for most of the sample period (1980-1994) while at other periods no symmetric pattern of interaction between the two policy variables was observed. Huang and Padilla (2002) wrote on fiscal policy and implementation of the Walsh Contract for Central Bankers.
CHAPTER THREE
RESEARCH METHODOLOGY
Research design
The researcher used descriptive research survey design in building up this project work the choice of this research design was considered appropriate because of its advantages of identifying attributes of a large population from a group of individuals. The design was suitable for the study as the study sought to fiscal policy and macroeconomic performance in Nigeria from 1980 to 2018
Sources of data collection
Data were collected from two main sources namely:
(i)Primary source and
(ii)Secondary source
Primary source:
These are materials of statistical investigation which were collected by the research for a particular purpose. They can be obtained through a survey, observation questionnaire or as experiment; the researcher has adopted the questionnaire method for this study.
Secondary source:
These are data from textbook Journal handset etc. they arise as byproducts of the same other purposes. Example administration, various other unpublished works and write ups were also used.
Population of the study
Population of a study is a group of persons or aggregate items, things the researcher is interested in getting information on fiscal policy and macroeconomic performance in Nigeria from 1980 to 2018. 200 staff of Boki local government area of cross rivers state was selected randomly by the researcher as the population of the study.
CHAPTER FOUR
PRESENTATION ANALYSIS INTERPRETATION OF DATA
Introduction
Efforts will be made at this stage to present, analyze and interpret the data collected during the field survey. This presentation will be based on the responses from the completed questionnaires. The result of this exercise will be summarized in tabular forms for easy references and analysis. It will also show answers to questions relating to the research questions for this research study. The researcher employed simple percentage in the analysis.
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATION
Introduction
It is important to ascertain that the objective of this study was to ascertain fiscal policy and macroeconomic performance in Nigeria from 1980 to 2018
In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of fiscal policy on the Nigeria economy
Summary
This study was on fiscal policy and macroeconomic performance in Nigeria from 1980 to 2018. Four objectives were raised which included: To ascertain the relationship between fiscal policy and macroeconomic performance, to find out how the policies have impacted on employment and unemployment in Nigeria, to find out the extent to which the policies have helped to improve investment climate in Nigeria, to ascertain the extent to which the policies have reduce inflation in the country. In line with these objectives, two research hypotheses were formulated and two null hypotheses were posited. The total population for the study is 200 staff of Boki local government of Cross River State. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made up heads of departments, counselors, senior staff and junior staff was used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies
Conclusion
This paper has provided a review and a better understanding of how the government fiscal operations contribute to the macroeconomic management of the Nigerian economy. It established the fact that increasing and rising trend of government expenditures over the years without the corresponding increase in the level of revenue, had deteriorated the fiscal stability resulting in the higher rate of deficits and domestic debt accumulation, as well as inducing more inflationary pressure within the market-oriented economy. In view of the decreasing price of crude oil in the international market accompanied by lower revenue generation, the rising inflationary pressure has continued to serve as a major obstacle in ensuring macroeconomic stability. With the monetary policy being constrained in addressing this problem as a result of the prevailing exchange rate regimes which adversely affect the activities of the commercial banks, this gave fiscal policy the opportunity to carry the main task of macroeconomic stabilisation in Nigeria.
Recommendation
Government fiscal policy should refocus and redirect government expenditure towards production of goods and services so as to enhance GDP growth. This can be achieved by setting specific goals/targets for each state and for the Federal Government. Attention should focus on the real sector. The goals should aim at minimizing, if not completely eradicating, diversion of public funds to private pockets and embezzlement. This may compel the local, state, and Federal Government to utilize their funds for the achievement of set economic goals within specified time periods. Factors to be considered in setting these goals/ targets should include the level of human and economic resources available, allocations from the federation account, and other factors considered relevant. Time limits set for the realization of these goals would encourage commitment, probity, accountability and transparency by public funds mangers. Government economic policies should focus on diversification of the economy to enhance the performance of the non-oil sector, so as to create more jobs in this sector. This will be a more effective way of reducing unemployment and increasing the gross domestic product. The non-oil sector in Nigeria has a greater potential for job creation than the oil sector. Efforts should be made by government to ensure appropriate policy mix for harmony and proper coordination of economic policies. Fiscal policy should give priority attention to capital and public investments by making them of higher proportion in gross government expenditure, thereby creating more jobs and enhancing the quality of public spending and the attainment of sustainable growth and development. Emphasis should be on the development of basic infrastructure (example. transportation, energy and communication). Human capital development should be a priority. To ensure that all the main objectives of fiscal policy and their targets are achieved, there is need to redirect pubic expenditures towards making Nigeria a producer nation. This ought to be the central focus of fiscal policy objective.
REFERENCES
- Adewuyi AO (2002). Balance of Payments Constraints and Growth Rate. Differences under Alternative policy Regimes in Nigeria. Ibadan:
- Adeoye T (2006). Fiscal Policy and Growth of the Nigerian Economy: NISER monograph series, p. 10.
- Amadi SN, Essi ID (2006). Government Economic Policy and Nigerian Capital Market Behaviour: A Causalty Analysis. J. Dev. Alternatives Area Stud., San Antonio, USA.
- Anyanwu JC (2007). Nigerian Public Finance. Onitsha: Joanee Educational Publishers Ltd.
- Aregbbyen O(2007). Public Expenditure and Economic Growth.African J. Econ. Policy. Ibadan, University of Ibadan Press. 1(1)1-37
- Dornbusch R, Fischer S (1990). Macroeconomics (5 th ed.) New York: McGraw-Hill Publishing Company.
- Ekanem OT, Iyoha MA (1999). Microeconomic Theory Benin City: Mareh Publishers.
- Gbosi AN (2007). The Nigerian Economy and Current Economic Reforms. Ibadan: Olorunnishola Publishers. Granger CWJ, Newbold P (1974). “Spurious Regressions in Econometrics, J. Econometrics., 2: 111-120
- Gujarati DN(2004). Basic Econometrics 4 th . Ed. (Tata McGraw- Hill Edition) p806 New Delhi: Tata McGraw- Hill Publishing Company Ltd.
- Gujarati DN (2003). Basic Econometrics 4 th . Ed. (Tata McGraw- Hill Edition). New Delhi: Tata McGraw- Hill Publishing Company Ltd
- Habeeb YA (1994). Achieving Sustainable output Growth in Nigeria through Demand Management. The Nigerian J. Econ. Soc. Stud., 36(1).