Effect of Fiscal Policy Tools on Economic Growth in Nigeria 2000-2023

ABSTRACT This study examines the effect of fiscal policy tools on Nigeria's economic growth from 2000 to 2023, focusing on government capital expenditure (GCAPEX) and government total revenue (GTREV). Fiscal policy is crucial for influencing economic performance, particularly in developing economies like Nigeria, where sustainable growth is a key objective. An ex-post facto research design was employed, utilizing secondary data from the CBN Statistical Bulletin, with Vector Autoregressive (VAR) analysis applied to test the hypotheses. The results indicates that while government capital expenditure revealed positive but statistically insignificant impact on GDP, with a coefficient of 2.432010 and a probability value of 0.5812, government total revenue exerts a negative and similarly insignificant effect, as indicated by its coefficient of -0.326735 and a probability value of 0.6979. These findings suggest that the interplay between capital expenditure and total revenue has an overall insignificant influence on economic growth in Nigeria during the period of study. In conclusion, increasing government capital expenditure, particularly in physical assets, education, medical care, and other capital-intensive sectors, could stimulate growth. Additionally, optimizing revenue collection methods is essential to reduce the economic burden on productive sectors, which can be achieved through efficient tax administration and avoiding excessive taxation. The study also recommends diversifying revenue sources to reduce dependence on a narrow range of income streams that negatively affect economic activity. Implementing these strategies may enhance the positive effects of capital expenditure while mitigating the adverse impacts of total revenue on Nigeria's economic growth, contributing to a more robust and sustainable economy.

1 01 Dec, 2024

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