Impact of Fiscal Policy on InclusiveGrowth in Nigeria

Abstract

Among the macroeconomic goals of the Nigerian government are the following objectives: to stimulate economic growth, reduce unemployment, poverty, and inequality. To achieve these objectives, the government continues to alter its expenditure pattern. Despite these policy changes, the rates of unemployment, poverty, and inequality continue to increase. The objective of this study is to investigate how fiscal policy can be designed to promote inclusive growth as well as identify the most effective fiscal policy instrument that can lead to inclusive growth in Nigeria, using annual data from 1980 to 2017. The Structural Vector Autoregressive (SVAR) model was adopted for the analysis. The result shows that government capital expenditure is a more effective fiscal policy instrument for
achieving inclusive growth in Nigeria. The dominance of the shocks to tax revenue has a higher impact on unemployment than on poverty and per capita GDP growth rate. Based on these findings, it is recommended that the Nigerian government should strengthen the mobilisation of tax revenue and channel it towards government capital expenditure in order to promote inclusive growth in Nigeria.

Keywords: Economic growth, fiscal policy, inclusive growth, government expenditure