Fiscal and Monetary Policy and its Effect on the Growth of Nigeria Economy

Abstract

The study examined the empirical link on the effect of fiscal and monetary policy on the Economic Growth of Nigeria (1986-2010). The objectives were to determine factors of fiscal and monetary policy that contributed to the growth of Nigeria economy. It made use of secondary data, from Central Bank of Nigeria statistical Bulletin, Volume 21, 2010 and employed the ordinary least squares method of statistical analysis. It was found out that government revenue had a positive impact and statistical significant on gross domestic product. Also shown that government expenditure was positively significant on the growth of Nigeria Economy. The second model depicts that money supply had a positive impact on gross domestic product and it discovered that this variable was statistically significant. Exchange rate variable had a positive impact on the performance of Nigeria economy. The finding revealed that inflation had a positive impact but there was no significant relationship between inflation and gross domestic product. It therefore suggests that government should increase the number of fiscal policy instruments over and above the ones currently in use. The study recommended that measures should be adopted that would ensure income generation and government revenue generating ventures.

Keywords: Balance of payment, Economic growth, Exchange rate, Government expenditure, Inflation, Money supply,