Fiscal Policy and Sectoral Output Performance in Nigeria

Olanipekun Emmanuel Falade
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Olanipekun Emmanuel Falade: Obafemi Awolowo University, Ile-Ife, Nigeria

International Journal of Research and Scientific Innovation, 2020, vol. 7, issue 1, 65-75

Abstract: In this study, the differential effects of fiscal policy variables on the performance of the key sectors of the economy namely; Industrial, Agricultural and Service sectors were investigated using an Autoregressive Distributed Lag (ARDL) and Error Correction Model (ECM) for the period of 1970-2018. Obtained results indicated that while both domestic and foreign debts have no significant effects on the three sectors examined in the short run, it was observed that foreign debt and government consumption expenditure have incremental effects on industrial sector’s output. Similarly, it was observed that while domestic debt crowd-in agricultural and services sectors’ outputs, it has a crowd-out effect on industrial output in the long run. It is also noteworthy that while government investment expenditure has positive effect on industrial output, its effects on agricultural output is detrimental in the long run. This implies that government can neutralize the negative effects of its domestic debt on industrial sector’s output either by increasing its consumption expenditure or rely more on foreign debt. It is recommended that government should focus more on investing in infrastructure such as irrigation, access road to farm land, storage facilities, processing equipment like milling machine, etc. in other to boost productivity in the sector.

Date: 2020
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