Fiscal Policy Instruments and Economic Development in Nigeria

Abstract The aim of this paper was to examine the effect of fiscal policy on economic development in Nigeria from 2000 to 2023. The fiscal policy variables that were taken into consideration were government expenditure, public debt, and taxation, while economic development was measured using the composite index of the human capital index. The study employed the fully modified ordinary least squares (FMOLS) technique of estimation since the unit root test reported that the time series variables were stationary at higher order of integration. From the result, it was observed that government expenditure exerted positive and significant effect on economic development in Nigeria. On the contrary, public debt and taxation generated negative and significant effects on economic growth. Other key variables that were noted to be of significant influence on economic development were official development assistance and trade openness (with a positive effect) along with inflation with negative effects. The paper therefore recommended an option of increasing government spending on productive sectors, reducing public debt, and implementing tax reforms. Keywords: Taxation, government expenditure, public debt, human capital index, fiscal policy