The Effectiveness of Fiscal Policy in Controlling Inflation and Stimulating Growth in Nigeria

This study evaluates the effectiveness of Nigeria's fiscal policy in controlling inflation and stimulating economic growth over the period 2013 to 2023. Fiscal policy, encompassing government expenditure, taxation, and deficit financing decisions, is one of the most important levers available to policymakers for managing macroeconomic stability. Nigeria's fiscal management has been shaped by commodity revenue volatility, rising public debt, and persistent inflationary pressure driven by structural supply-side constraints and currency depreciation. This study relies on secondary time series data sourced from the Central Bank of Nigeria, the Federal Ministry of Finance, and the International Monetary Fund's Nigeria Article IV consultation reports. Key variables include government expenditure composition, fiscal deficit ratios, money supply growth, Consumer Price Index, and real GDP growth. Vector autoregression models and Granger causality tests are applied. Results reveal that expansionary fiscal policy in the form of increased recurrent expenditure has contributed to inflationary pressure in Nigeria, while capital expenditure increases show a positive but delayed effect on economic growth. Tax revenue expansion, by contrast, shows a growth-neutral or mildly negative short-term effect. The study concludes that Nigeria's fiscal policy mix has been insufficiently growth-oriented and has exacerbated inflationary cycles. It recommends a fundamental rebalancing of public expenditure toward infrastructure capital investment and strict adherence to the fiscal responsibility framework to anchor inflation expectations.

Keywords: fiscal policy, inflation, economic growth, Nigeria, public expenditure.