Fiscal Consolidation, Macroeconomic Reform and Poverty Reduction in Nigeria, 1981-2020

Abstract

Advancing macroeconomic reform in Nigeria has been buffeted by two set of problems: First, the economy is volatile, with loose fiscal policy and poor management of both the volatility and the fiscal policy. Fiscal consolidation is part of the macroeconomic reform agenda of policy makers, Nigeria inclusive. However, despite all these fiscal reforms, Nigeria continues to record fiscal imbalance with respect to poverty reduction. This paper examined the effects of fiscal consolidation as part of macroeconomic reforms to reduce poverty in Nigeria spanning the periods of 1981 to 2019. The sources of data include the Central Bank of Nigeria (CBN) Statistical Bulletin (2020) and the African Development Bank Database, AfDB (2020) and the dynamic autoregressive distributed lag approach (ARDL) were utilized for the examination. The variable of poverty ratio proxy for poverty as the dependent variable were used, while the independent variables are, debt-to-GDP ratio (%), private investment (% of GDP), public investment (% of GDP), population growth rate (%), inflation rate (%) and fiscal balance to-GDP. The results show that fiscal consolidation has negative effects on poverty reduction in Nigeria within the reviewing period. The policy implications of these findings on economic policy fiscal consolidation as part of the macroeconomic reforms has not helped in reducing poverty in Nigeria and this is clearly evidentiary. The paper therefore, recommended among others; the need for government and policy makers to sustain and strengthen the fiscal consolidation and the macroeconomic reforms in its entirety in order to promote economic growth, reduce poverty and ensure shared prosperity in the medium to the long-term.