Effect of Fiscal Policy on Poverty Reduction in Nigeria

E. O. Ali; N. C. Nwezeaku; U. G. Chris-Ejiogu

doi:10.56201/ijebm.vol.12.no1.2026.pg163.176

📄 Download Paper

Effect of Fiscal Policy on Poverty Reduction in Nigeria

E. O. Ali, N. C. Nwezeaku, and U. G. Chris-Ejiogu

Abstract

This research examined how fiscal policy instruments influence poverty levels in Nigeria over a 35-year liberalized economic period from 1986 to 2020. Multiple diagnostic tests were conducted: descriptive statistics evaluated mean, standard deviation, kurtosis, skewness, and Jarque-Bera statistics; the Augmented Dickey-Fuller test assessed data stationarity; and Autoregressive Distributive Lag co-integration examined long-term relationships among variables. The ARDL method was selected for primary analysis given the confirmed long-run relationships, while Granger causality testing measured directional associations between variables. Stationarity testing revealed that all variables achieved stationarity at first difference except NOR and FRR, which were stationary at level. Co-integration results confirmed a substantial long-term relationship between fiscal policy measures and poverty in Nigeria. Short-run ARDL findings showed non-oil revenue initially exhibited a negative coefficient of -3.298345 at Lag 3, transitioning to consistent positive effects of 6.062662 at Lag 4 throughout subsequent periods. Federal retained revenue demonstrated an initial negative coefficient of -3.739652 at Lag 2, followed by a positive coefficient of 0.390469 at Lag 3 and returning to positive at 6.249618 in Lag 4 during the short-run analysis. Capital expenditure mirrored the federal retained revenue pattern, showing a negative coefficient of -6.786381 initially and at first lag, then alternating between positive and negative effects in the short run. Recurrent expenditure began with three- year lagged positive coefficients of 3.069591, 5.976088, and 4.406814 before concluding with a negative coefficient of -7.978000. Public debt uniquely displayed consistent negative effects, with an initial coefficient of -1.323569 and a positive coefficient of 3.415523 at Lag 3 in the short term. Causality analysis revealed that non-oil revenue and public debt demonstrated causal impacts on poverty

Keywords

Poverty ReductionNon-Oil RevenueCapital ExpenditureFederal Government Retained EarningsFiscal Policy

References

Agu, S. U., Okwo, I. M., Ugwunta, O. D., & Idike, A. (2015). Fiscal policy and economic growth in Nigeria: Emphasis on various components of public expenditure. Sage Open, 5(4), 1- 12. https://doi.org/10.1177/2158244015610171 Anyanwu, J. C. (2012). Accounting for poverty in Africa: Illustration with survey data from Nigeria (Working Paper Series No. 149). African Development Bank Group. Asghar, N., Hussain, Z., & Rehman, H. U. (2012). The impact of government spending on poverty reduction: Evidence from Pakistan 1972-2008. African Journal of Business Management, 6(3), 845-853. https://doi.org/10.5897/AJBM11.922 Central Bank of Nigeria. (2011). Statistical bulletin. CBN Publications. Dahmardeh, N., & Tabar, M. H. (2013). Government expenditures and its impact on poverty reduction: Empirical from Sistan and Baluchestan Province of Iran. International Journal of Academic Research in Economics and Management Sciences, 2(1), 251-260. Ihendinihu, J. U. (2014). The impact of fiscal policy on the Nigerian economy. Global Journal of Management and Business Research: B Economics and Commerce, 14(7), 84-105. Illyes, A. G., & Siddiqi, M. W. (2010). The impact of revenue gap on economic growth: A case study of Pakistan. Lambert Academic Publishing. Isedu, M. I. (2002). The link between public expenditure and economic growth in Nigeria. University of Nigeria Press. Jegedee, O. I. (2014). Internally generated revenue and expenditure pattern of local governments in Nigeria. Journal of Economics and Sustainable Development, 5(23), 66-72. Joy, J., & Panda, P. K. (2020). Does public debt impede economic growth? Evidence from Sri Lanka. Asian Journal of Economics and Banking, 4(3), 62-75. Kazunge, P. O., & Cheyo, J. M. (2014). Government expenditure, economic growth and poverty nexus in Tanzania. Lambert Academic Publishing. Mehmood, R., & Sadiq, S. (2010). The relationship between government expenditure and poverty: A cointegration analysis. Romanian Journal of Fiscal Policy, 1(1), 29-37. Mhlaba, N., & Phiri, A. (2019). Is public debt harmful towards economic growth? New evidence from South Africa. Cogent Economics & Finance, 7(1), 1- 15. https://doi.org/10.1080/23322039.2019.1603653 Modebe, N. J., Regina, G. O., Onwumere, J. U., & Imo, G. I. (2012). Impact of recurrent and capital expenditure on Nigeria's economic growth. European Journal of Business and Management, 4(19), 66-74. National Bureau of Statistics. (2019). 2019 poverty and inequality in Nigeria: Executive summary. NBS. Obi, Z. C. (2007). Fiscal policy and poverty alleviation: Some policy options for Nigeria. AERC Research Paper 164. African Economic Research Consortium. Ogba, L. O. (1999). Elements of public finance. Afri-Towers. Ogunjimi, J. (2019). Impact of public debt on investment: Evidence from Nigeria. African Journal of Economic Review, 7(2), 156-175. Sennoga, E. B., & Matovu, J. M. (2013). Public spending composition, growth and poverty reduction in Uganda: A macroeconomic perspective (Working Paper No. 2013/06). Economic Policy Research Centre. Weil, D. N. (2019). Fiscal policy. In The concise encyclopedia of economics. Liberty Fund Inc. https://www.econlib.org/library/Enc/FiscalPolicy.html P-ISSN 2695-186X World Bank. (2004). World development report 2004: Making services work for poor people. World Bank.

Effect of Fiscal Policy on Poverty Reduction in Nigeria

Abstract

Keywords

References

More Articles from IIARD INTERNATIONAL JOURNAL OF ECONOMICS AND BUSINESS MANAGEMENT