EXAMINATION OF THE ROLE OF FISCAL POLICY IN THE DEVELOPMENT OF NIGERIA ECONOMY
EXAMINATION OF THE ROLE OF FISCAL POLICY IN THE DEVELOPMENT OF NIGERIA ECONOMY
EXAMINATION OF THE ROLE OF FISCAL POLICY IN THE DEVELOPMENT OF THE NIGERIAN ECONOMY
This study was conducted to assess the role of fiscal policies in the development of the Nigerian economy.
A fundamental concern in Nigeria's economic recovery is the potential of implementing the most appropriate fiscal policies in the country. In light of this, the researcher addressed the following issues in this research study.
i. Inappropriate fiscal policy implementation
ii. Inconsistency in the application of budgetary policies.
iii. High degree of corruption
iv. Inefficient spending
Because of the nature of this investigation, chi-square was used. We used both primary and secondary data. Secondary data sources included newspapers, magazines, library stork, government publications and journals, and so on. Questionnaires were employed to collect main data.
Based on the conclusions of this research study, the researcher suggests that the country pursue the following initiatives in order to strengthen its economy.
i. The government should take steps to reduce policy inconsistency.
ii. To eliminate leakages in the system, tax and revenue generation should be addressed economically.
iii. The government should combat corruption since fiscal policy components will not achieve the desired degree of economic growth in Nigeria unless corruption is reduced in the country.
1.1 Background of The Study
The economy of any country, regardless of its structure, is governed by policies devised by the government. Some of these policies include economic policies, social policies, monetary policies, and so on; nevertheless, economic policies are the most essential of them.
Gbosi (2001) The economic variables are critical because they provide as the foundation for the success of the government's other programmes. To obtain the intended consequences, the constituent elements of these economic policies must be modified at the same time.
Fiscal policy, one of the key arms of economic policies, serves as a tool of planning, organising, managing, and coordinating the tempo of economic activities (Adeoye, 2006). Fiscal policy is an offshoot of Keynesian economics, and its logical analysis argues that it is a sure-fire way of stabilising the economy.
Modern fiscal policy seeks economic efficiency and stability (Olawumi and Ayinla 2007). Fiscal policy can be defined as a specific course of action that involves the formulation of tax structure and expenditure patterns. The effect of taxation encompasses all changes in the economy caused by the implementation of a tax system.
Expenditure, on the other hand, was intended to directly add to market effective demand and generate high-value multipliers by distributing revenue to those parts of the population with a high management propensity to consume.
Fiscal policy existed before to World War II as a crucial to economic reorganisation and development. Many economists proposed theories as a way to recover economically from the devastation of World War II.
However, in the early twentieth century, Lord John Keynes proposed a defined and constructive answer to the economic dilemma.
In his book, Lord Keynes believes that increasing government spending and lowering tax rates are the greatest strategies to boost aggregate demand and combat the hyperinflation that arose following World War II.
The earliest known forms of fiscal policy were adopted in Nigeria. The British Administration established it in the nineteenth century.
The existence of the indigenous government under Emirs, Obas, Obongs, Obis, and others, as well as the colonial rulers, complicated the political structure. In fact, the British government was paid for the management of the country.
The colonial rulers' income for development policy was based on Dr. Earl Grey's report (1852), in which he called for economic development among civilised people. Under British control, through self-determination.
The income generating approach based on tariffs paid on imported items was pursued because it avoided disturbance of the indigenous social and economic system and had no direct impact on the common Nigerian.
Furthermore, money from tariffs, which the British government supported, began to shrink as public outcry in Britain grew against the rise of Brutish influence in West Africa.
The government contribution was discontinued in 1870 and was lowered from N5000 to N2000 to N1000 in 1862, 1863, and 1865, respectively. The money was spent entirely on increasing the comfort of British officers and maintaining law and order. Revenue and expenditure volume also climb significantly well into the twentieth century.
Fiscal policy as a tool for economic development is no longer developed in isolation. They are developed and implemented concurrently with monetary and foreign policies by the government in order to address economic difficulties.
1.2 Statement Of the Problems
One of the key issues confronting the Nigerian government is the constant rise in the price of goods and services without a corresponding expansion in the productive base.
To address this, the federal government reduces government spending and raises taxes, particularly on middle and upper income individuals.
Unemployment, the nation's most serious socioeconomic challenge, is characterised by a low quality of living and poverty. In an effort to address the issue of unemployment, the federal government established non-profit organisations such as the National Directorate of Employment (NDE),
which is aimed at assisting the unemployed in their search for gainful employment, as part of the current government's poverty alleviation programme. GSM, or Global System for Mobile Communications, has undoubtedly created unparalleled job chances for thousands of Nigerians, and the market is expanding by the day.
For approximately three years, the Nigerian economy has experienced economic stagnation. This is due to low productivity, political instability, rapid population increase, rising unemployment, and other factors.
In light of this, the federal government has implemented a variety of fiscal policies. However, for the first time in many years, Nigeria topped the 5.5 percent growth rate forecast in 2004.
Nigeria's balance of payment status has been more chronic in the last two decisions. For example, Nigeria's foreign payment situation in 1995 was a deficit of $2774.4 million, which was decreased to $761.0 million in 1996.
To revitalise the economy, the government raised traffic on non-essential goods and services that can be produced locally, as well as offering tax breaks and incentives to local entrepreneurs in order to boost and promote local industries and develop experts.
1.3 Objectives of The Study
The purpose of this research is to investigate the influence of fiscal policy on the development of the Nigerian economy. The specific goals of this research are as follows:
1. To assess the role of fiscal policy in Nigeria's development.
2. To investigate the extent to which fiscal policy is implemented in Nigeria.
3. To assess the influence of fiscal policies on Nigeria's economic growth.
4. To assess the obstacles to the proper execution of fiscal policy in Nigeria.
5. To propose potential remedies to the identified difficulties.
1.4 Research Questions
Fiscal policy can be a helpful tool for economic growth and development if conducted correctly and on time. As a result, the following questions will be answered by the end of this project.
1. What are the functions of fiscal policy in Nigeria's economic development?
2. How well is Nigeria's budgetary policies implemented?
3. What are the effects of fiscal policy on Nigerian economic growth?
4. What are the potential obstacles to the proper execution of fiscal policy in Nigeria?
Ho: Fiscal policies have hampered Nigeria's economic development.
Hi: Fiscal measures have aided the growth of the Nigerian economy.
Ho: Fiscal policies in Nigeria have been properly executed for several years.
Hi: Fiscal policies in Nigeria have been poorly executed for several years.
1.6 Scope and Limitations of the Study
The purpose of the research is to look into the role of fiscal policy on the development of the Nigerian economy. Also discussed is the relationship between fiscal policies and other government economic policies,
as well as how they are used to combat inflation, unemployment, boost investment/production of goods and services, and overall encourage private participation in economic development.
This study emphasises the importance of fiscal policy in the Nigerian economy. Its focus includes the component of budgetary policies. Its relationship to other disciplines, as well as how it is applied in the economy.
It does not, however, incorporate comparisons with other countries because their economic structures and systems differ, resulting in an unfair comparison. The following are some of the constraints encountered during this research project.
a. Cost and timing constraints
b. Limited access to a secret document.
1.7 Importance of the Research
This research will assist both the public and commercial sectors due to the unequal relevance of a stable and unstable economy.
a. The government for better planning of all policies relating to their responsibilities to the economy in particular and the country in general.
b. The professional – those who analyse the economic system and for whom this study will provide insights into future research and implementation in their academic subjects.
b. Students – as part of their academic endeavour.
d. Entrepreneurs and businessmen who must grasp the implications and impacts of specific fiscal policies that may have a direct or indirect impact on their fortunes.
1.8 Definition of Terms
Statutory Allocation: A fund established by the federal government to pool surplus budgetary money, particularly from oil exports. It also offered funds for emergency purposes.
Taxation: Compulsory payments made by individuals, corporations, and partnerships to the government in order for it to run its operations.
Tax avoidance is a legal method of avoiding paying taxes by engaging in non-taxable activity.
Tax evasion is an illegal method of avoiding paying taxes to the government. It is a punishable offence.
Per Capital Income: A means of analysing a country's standard of life. It entails calculating the potential income per person in an economy.
Foreign Policy: The articulated path of action that defines Nigeria's relationship with other countries, as well as its position and attitude towards certain international issues.
Budget: An economic tool used by the government to predict expected revenue and project expenditure over a given time period, generally a year.
Marginal Propensity of Investment: The degree to which investment increases as income rises.
Inflation Rate: The rate or rate of increase in the general price level.
Marginal Propensity to Consume: The degree to which consumption levels rise as income rises.