FISCAL POLICY MANAGEMENT AND PRIVATE INVESTMENT IN NIGERIA

Segun Subair Awode

Abstract


The Nigerian government over the years embarked on diverse macroeconomic policy options to tinker the economy on the path of growth and development. Amongst the policy options readily employed is that of fiscal policy. Despite the lofty place of fiscal policy in the management of the Nigerian economy, the economy is yet to come on the path of sound growth and development. The intent of fiscal management is essentially to stimulate economic and social development by pursuing a policy stance that ensures a sense of balance between taxation, expenditure and borrowing that is consistent with sustainable growth. However, the extent to which fiscal management engenders private investment continues to attract theoretical and empirical debate especially in developing countries like Nigeria. In light of this, the present study fills the gap by examining the relationship between fiscal management and private investment in Nigeria between 1987 and 2015. The study employed ex-post facto research design. Secondary time series data were used for the study and these were sourced from CBN statistical bulletin and World Development Indicators, 2015. The data collected were analyzed using the Autoregressive Distributed Lag with inferences drawn at 5% significance level. The result of the relationship between fiscal management and private investment in Nigeria showed that inflation, capital expenditure, indirect tax and non-tax revenue had positive and significant effects on private investment (β=0.02, t=19.04; β=0.59, t=40.13; β=1.70, t=17.07; β=1.05, t=22.03 respectively) in Nigeria, while domestic credit to private sector had negative but significant effect on private investment (β = -0.09, t = -17.26) in Nigeria within the period. The study concluded that a crowding-in relationship exists between capital expenditure and private investment, while indirect tax revenue has significant and non-distortionary relationship with private investment. The study therefore recommends more public investment in capital projects and that the tax system should generally be made favorable towards private sector investment.


Keywords


Fiscal management; Private investment, Macroeconomic policy; Economic development

References


Abata M. A, Kehinde J. S. & Bolarinwa S. A. (2012). Fiscal/Monetary Policy and Economic Growth in Nigeria. International Journal of Academic Research in Economics and Management Sciences. 1(5): 75-88.

Agu O.C (2015). Determinants of Private Investment in Nigeria An Econometric Analysis. International Journal of Economics, Commerce and Management. 3(4): 1-14.

Agu S.U, Idike A.N, Okwor I.M and Ugwunta D. (2014). Fiscal policy and economic growth in Nigeria: emphasis on various components of public expenditure. Singaporean journal of business economics, and management studies. 2(12): 24-37.

Afia (2013). Private investment and fiscal policy in Pakistan. Journal of economic development. 38(1): 83-109.

Alesina, A., Ardagna, R. P., Perotti, R., & Schiantarelli, F. (2002). Fiscal Policy, Profits, and Investment. The American Economic Review, 92, 571–589.

Audu, N. P. (2012). The Impact of Fiscal Policy on the Nigerian Economy. International Review of Social Sciences and Humanities, 4(1): 142-150.

Babalola A.I. (2015) Fiscal Policy and Economic Development in Nigeria. Journal of Economics and Sustainable Development. 6(7): 150-159.

Isaac, M. K., & Samwel, K. C. (2012). Effects of Fiscal Policy on Private Investment and Economic Growth in Kenya. Journal of Economics and Sustainable Development, 3(7), 8-16.

Isaksson, A. (2001) Financial liberalization, foreign aid and capital mobility: Evidence from developing countries, Journal of International Financial Markets, Institutions and Money, 11(2001): 309-338.

Jorgensen, D. (1967). The Theory of Investment Behaviors, in Determinants of Investment. National Bureau of Economic Research, 129-155.

Kajimbwa M. (2013). “New Public Management: A Tribute to Margaret Thatcher”. Public Policy and Administration Research www.iiste.org ISSN 2224-5731(Paper) ISSN 2225-0972(Online), 3(5): 64-69.

Marattin, L., & Salotti, S. (2010). On the Usefulness of Government Spending in the EU area. MPRA Paper No. 24906.

Medee, P. N., & Nembee, S. G. (2011). Econometric Analysis of the Impact of Fiscal Policy Variables on Nigeria's Economic Growth (1970-2009). International Journal of Economic Development Research and Investment, 2(1), 172.

Mgbemena, O. O., Nwogwugwu, U. C. & Chris, K. U. (2015). Determinant of private investment in Nigeria manufacturing sub-sector. International journal of academic research in Business and Social Sciences. 5(5): 162-174.

Nathan P. A. (2013). The Impact of Fiscal Policy on the Nigerian Economy. International Review of Social Sciences and Humanities. 4(1). 142-150.

Okoro (2013). Government spending and economic growth in Nigeria. Global journal of management and business research economics and commerce. 13(5): 20-30.

Omitogun, O., & Ayinla, T .A (2007). Fiscal Policy and Nigerian Economic Growth. Journal of Research in National Development. 5 (2): 19-29.

Oshikoya, T. (1994). Macroeconomic Determinants of Domestic Private Investment in Africa: An Empirical Analysis. Economic Development and Cultural Change, 42(3), 573-595.

Oyeleke O. J., & Ajilore, O. T. (2014). Analysis of Fiscal Deficit Sustainability in Nigerian Economy: An Error Correction Approach. Asian Economic and Financial Review. 4(2): 199-210

Pesaran, M. H and Shin, Y. (1999), “An autoregressive distributed lag modelling approach to cointegration analysis”, In: Strom, S., Holly, A., Diamond, P. (Eds.), Centennial Volume of Rangar Frisch, Cambridge University Press, Cambridge.

Pesaran, M. H., Shin, Y. & Smith, R. J. (2001). Bounds Testing Approaches to the Analysis of Level Relationships. Journal of Applied Econometrics, 16, 289-326.

Sineviciene, L. & Vasiliauskaite, A. (2012). Fiscal Policy Interaction with Private Investment: The Case of the Baltic States. Inzinerine Ekonomika-Engineering Economics, 23(3), 233-241.




DOI: https://doi.org/10.18196/jesp.20.1.5011

Refbacks

  • There are currently no refbacks.


Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

JESP is indexed by:

                

 

Office:
Redaksi JESP UMY, Gedung E2 Lantai 2, Fakultas Ekonomi dan Bisnis, Universitas Muhammadiyah Yogyakarta
Jalan Brawijaya, Tamantirto, Kasihan, Bantul, Daerah Istimewa Yogyakarta 55183
Telp: (0274) 387656 ext.184
Fax: (0274) 387646
WA: +62 82327 810 910 (Managing Editor)
Email: jesp@umy.ac.id


Jurnal Ekonomi & Studi Pembangunan (JESP) is licensed under Creative Commons Attribution 4.0 International License.