Effect of Fiscal Policy on Poverty in Nigeria

• Published in: Account and Financial Management Journal 2023-02, Vol.8 (2)
• Main Authors: Cyril, Umeh, Okwy, S. M., Nzotta, Gloria, Chris-Ejiogu, Uzoamaka
• Format: Article
• Language: English
• ISSN: 2456-3374; 2456-3374
• DOI: 10.47191/afmj/v8i2.05

The study investigated the effect of fiscal policy on poverty in Nigeria. The study covered 35-year period, spanning from 1986 to 2020 being a liberalized era in Nigerian economy. Fiscal policy being the explanatory variables, was disaggregated into federal government retained revenue (FRR), government capital expenditure (GCE), government recurrent expenditure (GRE),non-oil revenue (NOR), and public debt (PD). Poverty index as a dependent variable, being the unit measure for change in the poverty rate was used as proxy for poverty. Diagnostics test employed were, descriptive statistics to measure the mean, standard deviation, kurtosis and skewness as well as the Jarque-Bera statistics of the variables, while Augmented Dickey-Fuller unit root test was used to test for the stationarity of the data and Autoregressive distributive lag co-integration was employed to test for long-run relationship existing among the variables. Autoregressive distributive lag (ARDL) was used for the analysis since there was a long run relationship existing among the variables and Granger causality test was also employed to measure the directional relationship of the variables under study. The unit root test result showed that all the variables studied were stationary at first difference except NOR and FRR which were stationary at level, and co-integration result showed that fiscal policy has a significant long run relationship with poverty in Nigeria. The ARDL result showed that non-oil revenue showed initial negative government retained revenue but started effect of -3.298345 Lag 3, and then consistent positive effects 6.062662 Lag 4 through the short run periods. The federal government retained revenue showed initial negative effect of -3.739652 Lag 2followed by positive effect of 0.390469 Lag 3 and a return on positive effect of 6.249618 Lag 4 within the short run period. The government capital expenditure had similar trend as the federal retained revenue with a negative effect of -6.786381 in the initial period and first lag and then swung between positive and negative effects within the short run period, while the government recurrent expenditure started out with three year lagged period positive effects of 3.069591, 5.9766088, & 4.406814 but ended with negative effect of -7.978000. It was only the public debt profile that out rightly showed negative effect. Public debt has initial negative effect of -1.323569 and positive effect of 3.415523 Lag 3on the short run. Granger c