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An Empirical Analysis of the Effect of Fiscal Policy on Real Sector Growth in Nigeria using ARDL Approach

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An Empirical Analysis of the Effect of Fiscal Policy on Real Sector Growth in Nigeria using ARDL Approach

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  • November 1, 2023
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Oluka, Kingsley Ugochukwu1, Ugwu, Felix Ikechukwu PhD2, & Chime, Angela Isioma3

123Department of Accountancy, Enugu State University of Science and Technology, Enugu State, Nigeria

Abstract

The study employs an empirical analysis, utilizing the ARDL approach, to investigate the impact of Fiscal Policy on Real Sector Growth in Nigeria. Specifically, it examines the influence of Federal government Non-oil Taxes and oil taxes, recurrent expenditure, and capital expenditure on the country’s inflation rate. Using data spanning from 1995 to 2020 from the Central Bank of Nigeria statistical bulletin, the research employs the Augmented Dickey-Fuller unit root test and the General-to-Specific approach to Autoregressive Distributed Lag (ARDL) modeling for establishing both long-run and short-run equilibrium conditions. The findings indicate that Federal government Non-oil Taxes have a negative and nonsignificant effect on Nigeria’s inflation rate in both the long and short run. Similarly, Federal government Oil Taxes, recurrent expenditure, and capital expenditure exhibit negative and nonsignificant impacts on the inflation rate, both in the long and short term. These results suggest that these fiscal variables do not significantly influence inflation rates in Nigeria. The study’s implications underscore the need for economic diversification, particularly in sectors like mining, to establish multiple robust income sources. Additionally, enhancing institutions, especially through anti-corruption agencies, is crucial to strengthen the oil sector’s impact on per capita growth. Proactive measures in recurrent expenditure areas such as education, agriculture, transportation, community services, and general administration are essential to bolster economic conditions.

Keywords Fiscal Policy; Real Sector Growth; ARDL Approach; Nigeria

Citation Oluka, K. U., Ugwu, F. I. & Chime, A. I. (2023).  An Empirical Analysis of the Effect of Fiscal Policy on Real Sector Growth in Nigeria using ARDL Approach. International Journal of Advanced Finance and Accounting, 4(4), 57-69, https://doi.org/10.5281/zenodo.10064759  
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