Fiscal Policy and Real Sector Performance in Nigeria

Ikwuegbu; Akuchi Doris; Nyeche; Ezebunwo; Amadi; Sonny Nwonodi

doi:10.56201/wjfir.v10.no8.2026.pg68.80

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Fiscal Policy and Real Sector Performance in Nigeria

Ikwuegbu, Akuchi Doris, Nyeche, Ezebunwo and, Amadi, Sonny Nwonodi

Abstract

This study examines the effect of fiscal policy on real sector performance in Nigeria from 1990 to 2024. The study specifically analysed the effect of capital expenditure, recurrent expenditure, external debt, and tax revenue on real sector performance in Nigeria proxied by agricultural value added. Data were sourced from the World Bank World Development Indicators and the CBN Statistical Bulletin. The study employed descriptive statistics, KPSS unit root test, ARDL bounds cointegration test, and the ARDL estimation. The KPSS results showed that the logarithm of capital expenditure and external debt were stationary at level, while other variables were stationary at first difference. The ARDL bounds test confirmed the existence of long-run relationships among the variables. The findings revealed that capital expenditure had a positive and statistically significant effect on agricultural value added in both the short and long run. External debt also exerted a positive and statistically significant effect on agricultural value added in the short and long run. Recurrent expenditure had a statistically significant negative effect at the first lag in the short run, while tax revenue exerted a statistically significant negative effect in the immediate short-run period. The study concluded that productive capital expenditure and appropriately managed external borrowing had the potential to enhance agricultural value added in Nigeria, while inefficient recurrent expenditure and tax-related constraints could adversely affect agricultural performance. The study recommended greater prioritization of productive agricultural capital expenditure, improved allocation of external borrowing to agricultural investments, more efficient management of recurrent expenditure, and measures to reduce distortionary tax burdens on the agricultural sector.

Keywords

ARDLKPSSfiscal policy and agricultural value added

References

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Fiscal Policy and Real Sector Performance in Nigeria

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