GOVERNMENT FISCAL PERFORMANCE AND REAL ECONOMIC VARIABLES IN NIGERIA: EVIDENCE FROM ARDL MODEL

Abstract

In this study, we estimate the long-run and short-run impacts of government fiscal performance indicators on real economic variables in Nigeria within the ARDL/ECM framework using yearly aggregate time series data from 1981 to 2022. We analyze three fiscal performance measures: namely, government revenue, government expenditure, and public debt. On the other hand, economic growth is examined in terms of real GDP, inflation, and gross fixed capital formation. All data are sourced from the annual CBN statistical bulletin. We find that both real GDP and gross fixed capital formation are persistent and depend on their previous levels. Also, we find that both government revenue and government expenditure play a significant role in determining real economic variables in the long run. However, they have no relationship with real economic variables in the short run. On the other hand, there is no evidence suggesting that public debt and real economic variables are related in the long run. However, in the short run, increase in public debt tends to crowd out investment but plays a highly significant role in inflation reduction. Hence, these results underscore the need for fiscal discipline towards a stable and predictable long-run economic growth in Nigeria.