Advances in Management and Applied Economics

An Appraisal of Fiscal Policy Measures and its Implication for Growth of the Nigerian Economy: 1970-2009

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  • Abstract

    This research examines problems surrounding procedures of fiscal policy and their influence on economic growth in Nigeria from 1970 - 2009. Theory envisage that fiscal policy can impinge on economic growth by changing motivation for investment and labour as well as by altering after-tax proceeds across sectors. It is clear that economists have different analysis concerning the effect of government spending and tax on economic growth in any nation. The research was conducted using an Ordinary Least Squares (OLS) technique of multiple regression models using statistical time series data from 1970-2009. The estimated result shows a positive relationship between the dependent variable (real gross domestic product) and the Independent variables (Government Expenditure and Taxes). This implies that the government expenditure is a strong determinant of economic growth especially when properly directed towards the provision of adequate basic infrastructural facilities to stabilize investment activities. The regression result also shows that tax was not properly signed and this could largely be credited to poor tax administration in Nigeria and over dependence of government on earnings from crude oil in funding her projects. Accordingly, the result agreed with the Keynesian theory, which supports that government involvement through the use of fiscal policy could accelerate economic activities hence growth. Based on the results, it was therefore suggested that there should be a total renovation of the tax system in Nigeria and the federal government of Nigeria should intensify her spending especially in the productive sectors of the economy that has the capability to contribute to economic growth in the country.