Impact of fiscal policy on economic growth in Nigeria: An approach of time series Econometric model

The Nigeria government through the help Ministry finance in several occasions have used fiscal Policy instruments in diverse ways to achieve economic growth yet Nigeria is still not achieved sustainable economic growth. The study examined the effect of fiscal policy’s components on economic growth over a period of 1980 to 2017. The specific objectives are to: investigate to what extent does components of fiscal policy effect Economic Growth in Nigeria and ascertain if there is long-term relationship between components of fiscal policy and Economic Growth in Nigeria. This study made use of expost-facto research design which enables us to measure the effect or relationship between dependence variable and explanatory variables using time-series secondary data. The data was subjected to Augmented Dickey-Fuller Unit Root test statistic, Engle-Granger Co-integration test, error-correction mechanism, Heteroscedasticity White Test, Ramsey Reset and Durbin-Watson test. The study concluded that the effect of fiscal policy components on Economics growth. The empirical result shows that the coefficient of government capital expenditure (CAPITAL) has 25% positive significant effect on Real GDP, government recurrent expenditure (RECURRENT) has 25% positive significant effect on Real GDP, Public external Debts (DEBTS) has 6% negative significant effect on Real GDP and government Taxes revenue (TAXES) has 41% negative significant effect on Real GDP. Real GDP has long-run negative relationship with public external Debts. Hence, the component of fiscal policy has long-run relationship with economic growth. The study recommends the Nigerian government: Government fiscal policy should refocus and redirect government expenditure towards production of goods and services as well as development of basic infrastructure (example. transportation, productivity, energy and communication). Human capital development should be a priority.