EFFECT OF FISCAL POLICY ON ECONOMIC GROWTH IN NIGERIA

1987-2017

Abstract

The study investigates the effect of fiscal policy on economic growth in Nigeria (1987 to 2017).
The variables of capital expenditure; recurrent expenditure, government borrowing and
taxation were regressed on gross domestic product in Nigeria over the period 1987 to 2017.
Econometric techniques including 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. 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
networks. Government should rely more on petroleum profit tax and value added tax that have
greater impact on investment than corporate income tax.