Year: 2025
Type: article
Abstract: Fiscal policy sustainability entails government’s ability to maintain a stable fiscal position over a long period of time without threatening stability of the economic or burdening the future generations with huge debts. This effort is geared towards managing its budget deficits, debt levels, and expenditure patterns to ensure long-term fiscal health. Empirical studies on the fiscal policy in Nigeria have much attention on management or vulnerability rather than its determinants. Thus, this study evaluates the determinants of fiscal policy sustainability in Nigeria from 1971 to 2023 with data gathered from the Central Bank of Nigeria (CBN) Statistical Bulletin. The ARDL Cointegration technique was employed to analyse the data. Results indicate that in the short run, temporary change/fluctuation in government expenditure (T∆GE) was positive and a significant determinant of both primary balance to GDP (DEFGDP) and debt changes to GDP (DEBT∆GDP) ratio. Also, both debt changes to GDP ratio lag 1(∆DEBTGDP(-1)) and temporary changes in GDP (T∆GDP) were positive, significant and jointly determine DEFGDP in Nigeria. Conversely, in the long run, the T∆GE was negative and not a significant determinant of DEFGDP and this showed that the Fiscal Responsibility Commission in Nigeria violates sufficient condition to achieve fiscal policy sustainability during the sampled period. The study recommends: prioritizing public expenditure on developmental projects to aid economic activities; improve the country’s revenue flow and avoid huge debt accumulation by reducing international loan defaults.
Source: Journal of Arid Zone Economy
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: bronze
OpenAlex ID: W4412083817