FISCAL POLICY

This study empirically investigated the impact of fiscal policy on economic development in Nigeria, covering the period from 2005 to 2022. Driven by the persistent challenge of low growth and high poverty rates despite resource wealth, the research specifically assessed the influence of Government Expenditure, Taxation (Non-Oil Revenue), and Public Debt on key indicators like GDP growth and Non- Oil Sector Contribution. Utilizing an ex-post facto design and applying time series econometrics, including the Error Correction Model (ECM), the study confirmed a long-run relationship among the variables. Findings revealed that while Government Expenditure had a positive and significant effect on GDP growth, both Taxation and Public Debt posed challenges: non-oil revenue was insignificant in driving diversification, and public debt had a significant negative long-run impact on development. The study concludes that the effectiveness of Nigeria's fiscal policy is currently undermined by an ineffective tax regime and an unsustainable debt burden. The key recommendation is for the government to implement urgent and holistic tax reforms alongside a strict debt management strategy to redirect resources toward productive capital investment and achieve sustainable economic development.

The broad objective of this study is to examine the effect of fiscal policy and aggregate economic activities on economic growth in Nigeria. To achieve the purpose of this study four hypothesis were formulated to guide the study, literature review was carried out on the variables and hypothesis of the study. A dynamic equation is specified to describe the relationship between the dependent variable RGDP and the independent variable GDP = f(Tax, HDC, GINV, TRN, SAVS). the study examined fiscal policy, aggregate economic activities and economic growth in Nigeria utilizing annual time series data for the period of 1981 to 2021. This research employed the following methods for analysis: Descriptive Statistics, Unit Root test, Co-Integration test, granger causality test and vector autoregressive technique of estimation. Based on the results of empirical analysis, it can be ascertained that there is sufficient evidence to indicate that fiscal policy, aggregate economic activities have long run relationship with economic growth in Nigeria as the trace statistics and max Eigen value test indicate a case of co-integration among the variables. However, according to the VECM result fiscal policy is not significant in influencing economic in the short run while in the long run it significantly influences economic growth. Consumption both first and second period lags significantly influences economic growth in Nigeria while investment seems not influence economic growth in Nigeria. Thus, it can be concluded, that fiscal policy and consumption drives economic growth in Nigeria while investment does not