1.1 CONTEXT FOR THE STUDY
The growth and stabilization of the Nigerian economy have not been stable throughout the years; as a result, the country’s economy has experienced several internal and foreign shocks and disruptions over the decades. Internally, the unstable investment and consumption patterns, as well as the incorrect execution of public policies, alterations in future expectations, and the accelerator, are some of the causes. Similarly, wars, revolutions, population growth rates and migration, technical transfer and change, and the openness of the Nigerian economy are some of the external factors that could influence the implementation of fiscal policy.
The cyclical changes in the country’s economic activities have resulted in recurrent increases in unemployment and inflation, as well as external sector disequilibria (Gbosi, 2001). In other words, fiscal policy is a major economic stabilization tool that entails measures to regulate and control the volume, cost, and availability of money in an economy, as well as its direction, in order to achieve a particular macroeconomic policy objective and to counteract undesirable economic trends in Nigeria (Gbosi, 1998). Therefore, they cannot be left to market forces of demand and supply and other stability instruments like as monetary and exchange rate policies, among others, to combat recognized problems (Ndiyo and Udah 2003). This may include an increase or decrease in taxes as well as government expenditures, which are the foundation of fiscal policy, but in reality, government policy requires a combination of fiscal and monetary policy instruments to stabilize an economy because none of these instruments alone can solve all of an economy’s problems (Ndiyo and Udah, 2003).
The Nigerian economy began experiencing a recession in the early 1980s, which led to a depression in the middle of the decade. This depression lasted till the beginning of the 1990s without recovery. As a result, the government consistently implemented fiscal policy measures to combat, stabilize, and reverse the economy’s decline. In light of the experience of the Great Depression, the government’s response to the Great Depression was to boost government spending (Nagayasu, 2003). According to Okunroumu (1993), the administration of the Nigerian economy in an effort to attain macroeconomic stability has been ineffective and counterproductive; thus, it cannot be said that the Nigerian economy is performing. This is evidenced by the negative inflationary trend, government fiscal policies, fluctuating foreign exchange rates, the fall and rise of the gross domestic product, an unfavorable balance of payments, and the growth in unemployment rates. As a result, the Nigerian economy is unable to function properly due to low capacity utilization caused by a lack of foreign money and variable and unpredictable government fiscal policies in Nigeria (Isaksson, 2001).
1.2 DESCRIPTION OF THE PROBLEM
It is a well-established truth that the market mechanism cannot execute all of a country’s economic functions; therefore, public policy such as fiscal policy is required to stabilize, correct, direct, and supplement market forces. The government employs fiscal policy in order to rectify market defects and failure. Throughout Nigeria’s history, governments have utilized these policies to stabilize and manage the economy with the goal of achieving desired macroeconomic objectives, such as promoting employment generation, ensuring economic stability, maintaining price stability and balance of payment viability, ensuring exchange rate stability, and sustaining stable economic growth. The fiscal policy thrust utilized to manipulate the economy depends on the objectives that must be attained during a given time period. The objective of government intervention in the economy through fiscal policy has been to control the revenue and expenditure sides of the government’s budget in order to attain specific national goals. In actuality, however, there have been many instances of waste, politicization of some spending, and high levels of misappropriation, mismanagement, and corruption. However, the researcher is investigating the effect of fiscal measures on the economic stabilization of Nigeria.
1.3 OBJECTIVES OF THE STUDY
These are the aims of this investigation:
Examine the effect of fiscal measures on the economic stabilization of Nigeria.
Examine the elements that influence the proper implementation of Nigeria’s budgetary policy.
Determine the effects of the budgetary measures undertaken by the Nigerian government.
1.4 RESEARCH QUESTIONS
What factors influence the effective implementation of diverse fiscal policies in Nigeria?
What are the effects of the budgetary measures undertaken by the Nigerian government?
1.5 Importance of the Research
The following describes the importance of this study:
1. The findings of this study will serve as a guide for the government of Nigeria, financial sector stakeholders, and the general public on how fiscal policies might be utilized to stabilize the Nigerian economy.
This research will also serve as a resource for other academics and researchers interested in conducting additional research in this sector; if used, it will go so far as to provide new explanations for the topic.
1.6 SCOPE AND RESTRICTIONS OF THE STUDY
This study on the influence of fiscal policies on the stabilization of the Nigerian economy will examine the various fiscal policies undertaken by the Nigerian government in light of their impact on the stabilization of the Nigerian economy.
1.7 LIMITATIONS OF STUDY
Financial limitation – Inadequate funds tend to impede the researcher’s efficiency in locating relevant resources, literature, or information and in collecting data (internet, questionnaire and interview).
Due to time constraints, the researcher will conduct this study alongside other academic duties. This will consequently reduce the time spent conducting research.