Empirical Review of the Impact of Fiscal Policy on the Manufacturing Sector of the Nigerian Economy (1980-2017)

Abstract

The study examined Empirical Review of the Impact of Fiscal Policy on the Manufacturing sector of the Nigerian Economy from 1980 to 2017. The main objective of the study is to examine the impact of fiscal policy on the manufacturing sector of the Nigerian economy. The model for the study comprises of Index of Manufacturing Sector as endogenous variable and proxy by IMS and exogenous variables were; Government Expenditure (GEXP), Company Income Tax rate (CITR) and Federal Government Domestic debt Outstanding (FDDO). Annual time series data were gathered from the Central Bank of Nigeria Statistical Bulletins from 1980 to 2017. The techniques used for analysis are the Ordinary Least Square Techniques tested at the 5% level of significance. The econometric techniques of Ordinary Least Squares (OLS) results reveals that the Government Expenditure (GEX) and Company Income Tax Rate (CITR) have positive relationship with the Index of Manufacturing Sector (IMS) while Federal Government Domestic Debt Outstanding (FDDO) has negative linear relationship with the Index of Manufacturing Sector (IMS). The study concludes that Government Expenditure and Company Income Tax do not have significant impact on the manufacturing output, while the Federal Government Domestic Debt Outstanding showed a negative and statistically significant impact on the manufacturing sector. The study recommends amongst others that Government should channel its expenditure into the provision of direct physical structures that will be able to stand the competitive nature of both domestic and global markets as well as draw a policy plan that will subsidize company income tax for the manufacturing sub-sector rather than increase it.

Keywords: Fiscal Policy, Monetary Policy, Government Expenditure, Manufacturing sector,  Nigeria Economy.

DOI: 10.7176/JESD/10-2-10