The Impact of Fiscal Policy on National Income and Economic Growth in Nigeria
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Background of the Study
Fiscal policy plays a dual role in influencing both national income and economic growth. In Nigeria, policy measures implemented from 2023 to 2025 have sought to enhance national income through effective taxation, public spending, and debt management. These fiscal policies are designed to stimulate aggregate demand, promote efficient resource allocation, and foster a stable macroeconomic environment. Empirical evidence suggests that well-coordinated fiscal policy can drive sustainable economic growth by increasing disposable income, stimulating investment, and generating employment (Akinola, 2023; Olubunmi, 2024).
The nexus between fiscal policy and economic growth is complex. While government spending can boost income through multiplier effects, excessive deficits and inefficient resource allocation may dampen growth prospects. The challenge lies in finding the optimal balance between revenue mobilization and public expenditure that supports long-term economic stability. This study examines how fiscal policy affects national income and growth by analyzing changes in GDP, income distribution, and investment levels. It will also consider the role of fiscal sustainability and the efficiency of policy implementation. The goal is to determine whether fiscal policy has successfully translated into measurable improvements in national income and overall economic performance.
Statement of the Problem
Despite numerous fiscal policy initiatives aimed at boosting national income and economic growth in Nigeria, the outcomes have been inconsistent. While some policy measures have led to increased disposable income and higher GDP growth rates, other factors—such as fiscal deficits, inefficient public spending, and administrative shortcomings—have undermined these efforts (Akinola, 2023). The challenge for policymakers is to identify and address the gaps between policy objectives and actual economic outcomes. Investors and economists have noted that the benefits of fiscal expansion are often offset by inflationary pressures and reduced investor confidence, leading to slower-than-expected growth (Olubunmi, 2024). This study aims to critically assess the overall impact of fiscal policy on national income and economic growth, identifying the strengths and weaknesses in current fiscal strategies and offering recommendations to optimize policy effectiveness.
Objectives of the Study
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To evaluate the effect of fiscal policy on national income levels in Nigeria.
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To analyze the impact of fiscal policy on overall economic growth.
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To propose recommendations for enhancing the effectiveness of fiscal policies in promoting growth.
Research Questions
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How does fiscal policy influence national income in Nigeria?
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What is the relationship between fiscal measures and economic growth?
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What policy interventions can optimize the impact of fiscal policy on economic performance?
Research Hypotheses
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H1: Fiscal policy positively influences national income in Nigeria.
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H2: Efficient fiscal management is associated with higher economic growth.
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H3: Fiscal deficits negatively affect the positive impact of fiscal policy on economic growth.
Scope and Limitations of the Study
This study focuses on fiscal policy initiatives in Nigeria from 2023 to 2025 and their impact on national income and economic growth. It utilizes data from government records, economic surveys, and academic research. Limitations include external economic shocks and difficulties in isolating the effects of fiscal policy.
Definitions of Terms
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Fiscal Policy: Government strategies related to taxation, public spending, and borrowing.
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National Income: The total income earned by a nation’s residents, including wages, profits, and rents.
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Economic Growth: The increase in the market value of goods and services produced by an economy over time.
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Fiscal Deficit: The shortfall when government expenditures exceed revenue.
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