Fiscal Policy and Poverty Reduction in Nigeria: ARDL Approach

Abstract

The ebbing state of fiscal policy and unwarranted poverty situation in the developing countries has continued to generate strong debates in the literature. Some strands of the literature have argued that the expenditure side of fiscal policy possesses elements that could reduce poverty significantly. Based on these existing arguments in the literature, this current study specifically investigated the extent to which the poor people benefit from government spending on education, agricultural sectors, health and the level of public debt. The autoregressive Distribution Lag method of estimation was considered to establish the result. Data on poverty headcount, government expenditure on health, government expenditure on agriculture, government expenditure on education and public debt were gathered from the World Bank Development Indicator and Central Bank of Nigeria Statistical Bulletin. The study revealed that fiscal policy has a significant impact on poverty reduction and long-run relationships existed between them. However, the result revealed that government spending on agriculture; education, health and public debt have no significant impact on poverty reduction in the long run. The result revealed that there is no significant relationship between government expenditure on health and poverty reduction in Nigeria. Therefore, the study concluded that fiscal policy has a significant impact on poverty reduction in Nigeria for the period under review.