The Impact of Fiscal Policy on Economic Performance in Nigeria (1981-2016)
Chapter One
Objective of the Study
The broad objective of this study is to examine the effect of fiscal policy on performance economic in Nigeria from 1981 to 2016
- To determine the trend and pattern government expenditure on economic growth in Nigeria.
- To evaluate the effects of Public debts on economic growth in Nigeria.
- To ascertain how revenue affect the growth of the Nigerian economy.
CHAPTER TWO
REVIEW OF RELATED LITERATURE
Conceptual Review/Framework
The term fiscal policy has conventionally been associated with the use of taxation and public expenditure to influence the level of economic activities. Fiscal policy deals with government deliberate actions in spending money and levying taxes with a view to influencing macroeconomic variables in a desired direction. This includes sustainable economic growth, high employment creation and low inflation (Microsoft Corporation, 2004). Thus, fiscal policy aims at stabilizing the economy. Increases in government spending or a reduction in taxes tend to pull the economy out of a recession; while reduced spending or increased taxes slow down a boom (Dornbusch & Fischer, 1990). Fiscal policy involves the use of government spending, taxation and borrowing to influence the pattern of economic activities and also the level and growth of aggregate demand, output and employment. Fiscal policy entails government’s management of the economy through the manipulation of its income and spending power to achieve certain desired macroeconomic objectives (goals) amongst which is economic growth (Medee & Nembee, 2011). Peter and Simeon (2011) define fiscal policy as the process of government management of the economy through the manipulation of its income and expenditure and to achieve certain desired macroeconomic objectives. Central Bank of Nigeria (2011) defined fiscal policy as the use of government expenditure and revenue collection through tax and amount of government spending to influence the economy. In finance, fiscal policy is the use of government revenue collection (taxation) and expenditure (spending) to influence the economy. The two main instruments of fiscal policy are government taxation and expenditure. Geoff (2012) contended that fiscal policy involves the use of government spending, taxation and borrowing to affect the level and growth of aggregate demand, output and jobs creation. It is the government spending policies that influence macroeconomic conditions. These policies affect tax rates, interest rates and government spending, in an effort to control the economy. Fiscal policy is the means by which a government adjusts its levels of spending in order to monitor and influence a nation‟s economy. From all these definition, it was deduced that one of the regulatory policies used by government in achieving its objectives to bring about economic growth is fiscal policy. Fiscal policy is an outgrowth of Keynesian economics; its logical analysis suggests that it offers a sure-fire means of stabilizing the economy. The goal of modern fiscal policy is to achieve economic efficiency and stability. In a modern economy, no sphere of economic life is untouched by the government. Two major instruments or tools are used by government to influence private economic activity; taxes and expenditure but not limited to these two, it may include public debt, public work among others.
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 the impact of fiscal policy on economic performance in Nigeria from 1981 to 2016.
Sources of data collection
Data were collected from two main sources namely:
- Primary source and
- 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 gathering information the impact of fiscal policy on economic performance in Nigeria from 1981 to 2016. Two hundred (200) staffs of CBN Ibadan, Oyo were 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 the impact of fiscal policy on economic performance in Nigeria from 1981 to 2016
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 economic performance in Nigeria from 1981 to 2016
Summary
This study was on the impact of fiscal policy on economic performance in Nigeria from 1981 to 2016. Three objectives were raised which included: To determine the trend and pattern government expenditure on economic growth in Nigeria and to evaluate the effects of Public debts on economic growth in Nigeria and to ascertain how revenue affect the growth of the Nigerian economy. 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 CBN in Ibadan. 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 human resource managers, accountants, customer care officers and marketers were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies
Conclusion
This study examined the short and long run impact of fiscal policy on economic performance in Nigeria using annual time series data for the period 1981 to 2016. A vector error correction model was used to determine the effects of fiscal policy aggregates on economic development in Nigeria. The fiscal policy aggregates considered in this study were government expenditure disaggregated to recurrent and capital expenditure, government investment and tax revenue. Results from this study revealed that government recurrent expenditure and government investment both have short and long run positive significant impact on economic development. Government capital expenditure has a short run positive effect but a reversal in the long run. Tax revenue negatively affects development in both the short and long run
Recommendation
The study recommends the Nigerian government to further increase expenditure on economically viable investment to improve individual income through employment and increased output. Capital expenditure should be well monitored and ensure that these expenditures are not diversified to individuals’ pockets and also quality assurance be gotten from executors of government projects. The government should reduce the corporate tax rate (direct tax rate). This would help to increase aggregate demand, savings and investments through expansion by individuals and existing businesses. However, the Federal Inland Revenue Service should explore many other untapped ways of getting more tax revenue for the government as there are still many people and firms who do not pay tax out of tax evasion and avoidance.
References
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- Alex M. and Peter R. (2008): Fiscal Policy and Economic Development. IMF Working Paper 08/155; June 1, 2008. 6.
- Amanja D. and Morrissey O. (2005): Fiscal Policy and Economic Growth in Kenya. Centre for Research in Economic Development and International Trade, University of Nortingham. www.nortingham.ac.uk/economics/research/credit accessed 29/6/’10 7.
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