IMPACT OF FISCAL POLICIES ON THE ECONOMIC GROWTH OF NIGERIA
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IMPACT OF FISCAL POLICIES ON THE ECONOMIC GROWTH OF NIGERIA
Chapter one
INTRODUCTION
1.1 Background of the Study
The Nigerian economy’s growth and stabilisation have been volatile over the years, resulting in several shocks and disturbances both internally and abroad.
Internally, some of the variables responsible for it include volatile investment and consumption habits, poor execution of public programmes, shifts in future expectations, and the accelerator.
Similarly, external issues highlighted include wars, revolutions, population growth rates and migration, technical transfer and innovations, and the openness of the Nigerian economy, which could all have an impact on fiscal policy execution.
The cyclical changes in the country’s economic activities have resulted in recurrent increases in unemployment and inflation rates, as well as external sector imbalances (Gbosi 2001).
In other words, fiscal policy is a major economic stabilisation tool that involves taking measures to regulate and control the volume, cost, availability, and direction of money in an economy in order to achieve a specific macroeconomic policy goal and counteract undesirable trends in the Nigerian economy (Gbosi, 1998).
As a result, they cannot be left to market forces of demand and supply, and other instruments of stabilisation, such as monetary and exchange rate policies, are utilised to address the highlighted difficulties (Ndiyo and Udah 2003).
This may include an increase or decrease in taxes as well as government expenditures, which form the foundation of fiscal policy; however, in reality, government policy requires a combination of fiscal and monetary policy instruments to stabilise an economy because none of these single instruments can solve all of an economy’s problems (Ndiyo and Udah, 2003).
The Nigerian economy began to experience recession in the early 1980s, which led to a depression in the mid-1980s. This depression lasted into the early 1990s, with little signs of improvement.
As a result, the government continuously implemented fiscal policy measures to address, stabilise, and overcome the deteriorating economy.
Drawing on the Great crisis, government policy measures to combat the crisis included increased government spending (Nagayasu, 2003). According to Okunroumu (1993), the management of the Nigerian economy to attain macroeconomic stability has been unproductive and bad, hence one cannot claim that the Nigerian economy is performing.
This is seen in the adverse inflationary trend, government fiscal policies, undulating foreign exchange rates, the fall and rise of GDP, an unfavourable balance of payments, and rising unemployment rates, all of which are signs of developing macroeconomic instability.
As a result, the Nigerian economy is unable to function effectively in an environment characterised by poor capacity utilisation due to a lack of foreign money and variable and unpredictable government fiscal policies (Isaksson, 2001).
1.2 Statement of the Problem
It is well acknowledged that a country’s economic functions cannot be performed only by market mechanisms; thus, public policy, such as fiscal policy, is essential to stabilise, correct, direct, and complement market forces.
Fiscal policy is one of the tools that the government utilises to address market defects and failures. In Nigeria, governments have used these policies to stabilise and manage the economy in order to achieve desired macroeconomic objectives such as job creation, economic stability, price stability, balance of payment viability, exchange rate stability, and stable economic growth.
The fiscal policy thrust used to manipulate the economy is determined by the objectives that must be met at any given time period. The government has intervened in the economy through fiscal policy, manipulating the receipt and expenditure sides of its budget to achieve certain national goals.
The reality, however, is that there have been several wastes, some spending has been politicised, and there has been widespread embezzlement, mismanagement, and corruption. However, the researcher is investigating the role of fiscal policies in the stabilisation of the Nigerian economy.
1.3 Objectives of the Study
The aims of this investigation are as follows:
1. To investigate the role of fiscal policies in the stabilisation of the Nigerian economy.
2. Investigate the factors impacting the effective implementation of various fiscal policies in Nigeria.
3. Identify the repercussions of the Nigerian government’s fiscal policy.
1.4 RESEARCH QUESTIONS.
1. How do fiscal policies affect the stability of the Nigerian economy?
2. What factors influence the effective execution of various fiscal policies in Nigeria?
3. What are the effects of the Nigerian government’s enforced fiscal policies?
1.5 Significance of the Study
The following are the implications of this study:
1. The findings of this study will serve as a beneficial reference for the Nigerian government, banking sector stakeholders, and the general public in terms of how fiscal policies might be employed to stabilise the Nigerian economy.
2. This research will also serve as a resource base for future academics and researchers interested in conducting additional research in this sector, and if implemented, will go so far as to provide new explanations for the topic.
1.6 SCOPE AND LIMITATIONS OF THE STUDY
This study on the impact of fiscal policies on the stabilisation of the Nigerian economy will look at various fiscal policies implemented by the Nigerian government and their effects on the Nigerian economy’s stability.
1.7 Limitations of Study
Financial constraints- Insufficient funds tend to restrict the researcher’s efficiency in accessing relevant resources, literature, or information, as well as in data collecting (internet, questionnaire, and interview).
Time constraints: The researcher will conduct this investigation while also working on other academic projects. This will reduce the amount of time spent on research.
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