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Fiscal Discipline and Public Investments in Nigeria

Umoh, Unyime Emmanuel, Ugwuanyi, Georginia O., Osuala, Alex E.

Abstract

This study evaluated the impact of fiscal discipline on public investments in Nigeria using yearly time series data spanning from 1981 to 2024. Specifically, the study investigated how fiscal deficit management , public debt sustainability , government recurrent expenditure , and revenue mobilization efficiency influence public investments. The Autoregressive Distributed Lag technique was employed for the analysis. The result of the bounds test revealed the absence of cointegration among the variables, implying that no long-run relationship existed between fiscal discipline indicators and public investments in Nigeria within the study period. Consequently, the analysis focused on the short-run dynamics. The findings showed that fiscal deficit management significantly reduced public investments in the short run, although its lagged value exerted a positive effect, suggesting that the adverse impact may diminish over time. Public debt sustainability also exhibited a significant negative effect initially, while subsequent adjustments indicated a delayed positive contribution to public investments. Government recurrent expenditure had no statistically significant short-run impact on public investments in Nigeria. Revenue mobilization efficiency was excluded from the short- run ARDL estimation because its time-series properties did not support dynamic differencing within the estimation framework. The study concludes that weak fiscal discipline, particularly excessive fiscal deficits and unsustainable debt patterns, constrains public investment growth in Nigeria in the short run. The study implies that fiscal authorities must adopt prudent fiscal management strategies capable of balancing macroeconomic stability with sustainable capital investment expansion. The study therefore recommends that the government should strengthen fiscal deficit controls, improve debt management practices, prioritize productive public expenditures, and enhance institutional mechanisms for fiscal accountability and transparency in order to stimulate sustainable public investment growth in Nigeria.

Keywords

Fiscal disciplinefiscal deficit managementpublic debt sustainabilitygovernment recurrent expenditurerevenue mobilization efficiency and public investments

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