An Evaluation of the Role of Fiscal Policy in Reducing Income Inequality in Nigeria
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Background of the Study
Reducing income inequality remains a top priority for many emerging economies, and fiscal policy is considered one of the most potent tools for achieving this objective. In Nigeria, fiscal measures introduced between 2023 and 2025—such as progressive taxation, increased social spending, and targeted subsidy reforms—have been deployed with the aim of narrowing the income gap between different socioeconomic groups. By redistributing wealth through improved tax collection and public transfers, these policies are expected to create a more balanced economic environment (Afolabi, 2023).
Fiscal policy, when effectively designed and implemented, can address structural inequities by providing financial support to low-income households and investing in human capital development. However, challenges such as administrative inefficiencies, corruption, and regional disparities often undermine the potential of these measures. Recent empirical studies indicate that while fiscal policy interventions have the capacity to reduce income inequality, their effectiveness is heavily dependent on the transparency and efficiency of policy execution (Ibrahim, 2024). Moreover, the overall impact is moderated by external factors such as inflation and global economic trends. This study aims to evaluate the role of fiscal policy in reducing income inequality by examining recent reforms and their outcomes. It will explore the mechanisms through which fiscal adjustments translate into redistributive effects, thereby informing policy recommendations for a more equitable Nigerian economy.
Statement of the Problem
Despite concerted efforts to use fiscal policy as a tool for reducing income inequality, Nigeria continues to experience significant disparities in wealth distribution. The measures implemented between 2023 and 2025 have yielded mixed results, with some regions experiencing modest improvements while others continue to lag behind (Afolabi, 2023). The gap between policy intent and real-world outcomes is largely attributed to issues such as inefficient public spending, corruption, and a narrow tax base that limits the reach of redistributive policies (Ibrahim, 2024). Additionally, the lack of robust data on income distribution and policy impact hampers the ability to conduct a thorough evaluation of these interventions. These challenges have led to persistent income inequality, which in turn affects overall economic stability and social cohesion. Therefore, it is imperative to critically assess the extent to which fiscal policy is successful in reducing income inequality and to identify the factors that impede its effectiveness.
Objectives of the Study
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To evaluate the impact of recent fiscal policy measures on income inequality in Nigeria.
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To identify the key challenges that hinder effective income redistribution.
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To propose policy interventions that enhance the redistributive effects of fiscal measures.
Research Questions
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How effective have fiscal policy measures been in reducing income inequality in Nigeria?
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What are the main challenges in the implementation of redistributive fiscal policies?
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What policy adjustments can further reduce income inequality?
Research Hypotheses
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H1: Progressive fiscal policies significantly reduce income inequality in Nigeria.
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H2: Inefficient public spending undermines the redistributive impact of fiscal measures.
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H3: Improved transparency in fiscal administration leads to greater income equality.
Scope and Limitations of the Study
This study investigates fiscal policy measures aimed at reducing income inequality in Nigeria from 2023 to 2025. It employs data from governmental sources, income distribution surveys, and academic literature. Limitations include data gaps, external economic influences, and regional variability in policy implementation.
Definitions of Terms
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Income Inequality: The uneven distribution of income among individuals or groups within an economy.
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Redistributive Policies: Fiscal measures designed to reduce disparities in income or wealth.
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Progressive Taxation: A tax system in which the tax rate increases as the taxable amount increases.
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Social Spending: Government expenditures on welfare programs aimed at supporting lower-income groups.
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