The Eficacy of Fiscal Policy in Promoting Economic Growth and Reducing Poverty in Nigeria

Abstract

Over the years, fiscal policy has been the most important instrument for influencing macroeconomic performance in Nigeria. The paper attempts to examine if the federal government has been able to effectively use this instrument to enhance economic growth and reduce poverty in Nigeria. Using secondary data from relevant government institutions, books, journals and newspapers, the paper shows that within the year under review, aggregate growth has been slow and sectoral growth uneven. Also, the incidence of poverty has continued to rise. These situations have been attributed to ineffective fiscal policy implementation and lack of budget discipline. The inflationary rate has continued to accelerate and the budget deficit is higher. Also recurrent expenditure has continued to take a larger portion of the total expenditure, causing the increase in the nation’s debt profile. The non-oil sector contribution to the nation’s revenue has not improved and there is still high incidence of extra-budgetary allocation. These are contrary to the fiscal objectives within the years under review. The paper suggested that government should put in place measures to ensure strict budget discipline, not only at the federal level, but also at the state and local government levels. The efforts of the government in curbing corruption should be strengthened. Also the government should ensure policy consistency and continuity and this should be taken into consideration in the formulation and implementation of budgets. The PPB is thus recommended for the country. This is the only way forward for any fiscal policy of the government to achieve its objectives, especially in promoting economic growth and reducing poverty.