The Role of Fiscal Policy in the Management of Nigerian Economy

This study critically examined the role of fiscal policy in managing Nigeria’s economy, specifically assessing the impact of government expenditure, taxation, and public debt on Real Gross Domestic Product (RGDP). It employed time series data and the Autoregressive Distributed Lag (ARDL) model, supported by unit root tests and bounds testing to analyze short-run and long-run dynamics. The key findings were clear. Firstly, government spending, especially on areas like roads, schools, and hospitals, had a strong positive effect on economic growth, particularly in the short term. Secondly, taxes were found to have a slight negative effect on growth, but this result was not strong enough to be definitive, suggesting the current tax system may be inefficient. Finally, public debt helped the economy a little in the short run but became harmful to long-term growth if too much debt was accumulated. The study concluded that wise fiscal policy is vital for Nigeria. It recommended that the government should focus on productive spending, reform the tax system to make it more growth-friendly, and be very careful to only borrow for projects that will benefit the economy in the future, ensuring debt remains sustainable.