An Examination of the Relationship Between Fiscal Policies and GDP Growth in Nigeria
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Background of the Study
Fiscal policies are fundamental tools for economic management and growth, particularly in developing economies like Nigeria. With a diverse economic structure, Nigeria has employed various fiscal measures—ranging from tax adjustments and subsidy reforms to public investment initiatives—to stimulate GDP growth and achieve macroeconomic stability. Over the period 2023–2025, these policies have undergone significant revisions in response to both domestic challenges and global economic shifts. Recent studies underscore the critical role of fiscal policies in not only stabilizing the economy during downturns but also in spurring long-term growth through strategic public investments and efficient resource allocation (Ogundele, 2023).
The Nigerian government’s renewed focus on fiscal discipline, enhanced revenue generation, and improved public spending efficiency is viewed as central to achieving sustained GDP growth. Fiscal policies have been strategically reoriented to reduce dependency on oil revenues, diversify the economy, and foster a business-friendly environment. Such reforms are expected to enhance investor confidence, improve the competitiveness of local industries, and ultimately lead to robust economic performance. However, despite these positive intentions, the effectiveness of fiscal policies in driving GDP growth remains a contentious issue. Critics argue that persistent challenges such as corruption, bureaucratic inefficiencies, and inadequate policy implementation often undermine the potential benefits of well-crafted fiscal strategies (Balogun, 2024).
Furthermore, the complex interplay between fiscal policies and other macroeconomic variables, such as inflation, exchange rates, and interest rates, means that their direct contribution to GDP growth is difficult to isolate. The economic literature suggests that while fiscal measures can act as catalysts for growth, their impact is contingent on the broader economic environment and the efficiency of policy execution. Empirical evidence from the recent fiscal years indicates that the intended stimulative effects on GDP may be diluted by structural impediments within the Nigerian economy (Olagunju, 2025). This study aims to comprehensively evaluate the relationship between fiscal policies and GDP growth, employing both quantitative analyses and qualitative assessments. The findings will not only clarify the effectiveness of current fiscal measures but also inform future policy adjustments to better support sustainable economic growth.
Statement of the Problem
Despite the centrality of fiscal policies to Nigeria’s economic agenda, their role in spurring GDP growth remains ambiguous. Over recent years, although significant reforms have been enacted to enhance revenue collection, reduce fiscal deficits, and boost public spending, the anticipated acceleration in GDP growth has not been consistently realized (Ogundele, 2023). This inconsistency raises questions regarding the effectiveness of these policies in addressing underlying structural challenges. One major concern is that while fiscal measures are designed to stimulate economic activity, issues such as inefficient public spending, bureaucratic delays, and corruption have impeded their impact. The gap between policy intent and outcome has created uncertainty among investors and policymakers alike (Balogun, 2024).
Moreover, the multifactorial nature of economic growth complicates the analysis of fiscal policy effects. External factors such as global commodity price fluctuations, exchange rate volatility, and international economic pressures further confound the relationship between fiscal policy and GDP growth. Consequently, it becomes challenging to attribute variations in economic performance solely to domestic fiscal measures. The lack of robust and timely data exacerbates these difficulties, hindering a clear assessment of policy outcomes (Olagunju, 2025). In light of these challenges, there is a pressing need to reexamine the fiscal strategies implemented in Nigeria and to critically assess their direct and indirect effects on GDP growth. This study aims to fill this gap by investigating the extent to which fiscal policies have contributed to economic growth and by identifying the key factors that may be undermining their potential effectiveness.
Objectives of the Study
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To determine the impact of fiscal policies on GDP growth in Nigeria.
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To identify the key channels through which fiscal measures influence economic performance.
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To recommend policy adjustments for enhancing the growth effects of fiscal interventions.
Research Questions
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How do fiscal policies influence GDP growth in Nigeria?
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What are the primary mechanisms through which fiscal measures impact economic performance?
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What policy reforms are necessary to optimize the contribution of fiscal policies to GDP growth?
Research Hypotheses
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H1: Fiscal policies have a significant positive effect on GDP growth in Nigeria.
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H2: Effective public spending and revenue mobilization directly correlate with higher economic growth.
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H3: Structural inefficiencies in fiscal policy implementation hinder the full growth potential of the Nigerian economy.
Scope and Limitations of the Study
This research examines fiscal policy measures implemented from 2023 to 2025 and their impact on Nigeria’s GDP growth. It utilizes data from governmental sources, economic surveys, and academic research. Limitations include the influence of external economic shocks, potential measurement errors, and the difficulty in isolating the effects of fiscal policy from other macroeconomic determinants.
Definitions of Terms
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Fiscal Policies: Strategies employed by the government involving taxation, spending, and borrowing to influence economic performance.
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GDP Growth: The rate of increase in the economic output of a country, typically measured as a percentage increase in gross domestic product.
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Revenue Mobilization: Efforts by the government to increase its income through taxes and other forms of revenue.
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Economic Performance: Overall indicators of economic health, including growth rates, employment levels, and industrial output.
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