2.2.1 Fiscal Policy and Economic Growth Laopodis (2009) opines that fiscal policy is a tradeoff action between government revenue collections and government spending. In Nigeria, monetary policy has been used since the Central Bank of Nigeria (CBN) was saddled the responsibility of formulating and implementing monetary policies by Central Bank Act of 1958. aggregates (broad money) and the ultimate monetary policy goals, inflation or output. Format: PDF and MS Word (DOC) pages = 65 ₦ 3,000 However no significant correlation have been found between social expenditures on one hand and the level of growth of GDP on the other (Lindert: 2004). Secondly, fiscal policy could also be used to prevent rampant inflation. The result of this study does not support the assertion that a tight monetary policy coupled with a contractionary fiscal policy will engender natural rate of growth of the Nigerian economy. However summarizing empirical tests, Alkinson (1999:32-33) and Lindert (2004:86-88) demonstrate that most studies have found no significant associations even in multivariate tests. 3. This paper reviews the impact of financial liberalisation on monetary policy in Nigeria, examining in particular the progress made in the transition from direct to indirect forms of monetary management. During this period, monetary policy in Zambia helped to reduce inflation from the triple digits of the 1990s to current single digits. ii. Any borrower normally has to pay the lender more than the principal originally received. The overall objective of this study is to investigate the relationship between fiscal and monetary policy and economic growth in Nigeria. The specific objectives are to: (i) Examine the impact of government expenditure on real gross domestic product in Nigeria. The Multiplier can be defined as the ratio of the change in income and the change in any of the components of aggregate demand (C,I,G,M). These hypotheses are stated in their null context as follows: H0: Fiscal does not significantly influence economic growth in Nigeria, H0: Monetary policy does not significantly influence economic growth in Nigeria, H0: Fiscal and monetary policies taken jointly does not significantly influence economic growth in Nigeria. The debate about the impact of fiscal policy on the economy has been raging for over a century, but in general, it’s believed that higher government spending helps stimulate the economy, while lower spending acts a drag. And the average public debt maturity has lengthened significantly. Nevertheless the impact such a policy such as increase in money supply will have in the economy is dependent on the elasticity of the money demand-supply curve. This paper discusses the evolution of monetary policy in Nigeria in the past four decades. 2.1 History of fiscal policies in the Nigeria pre-independence 2.2 Definition and meaning of fiscal policies 2.3 Difference between fiscal and monetary policies 2.4 Tax as a tool of fiscal policy 2.5 Expenditure in fiscal policy 2.6 Tax and expenditure in fiscal policy 2.7 Limitation of fiscal policy … In Nigeria, the monetary policy is the macroeconomic policy laid down by the Central Bank of Nigeria. The study examined the impact of government fiscal and monetary policies on economic growth within the period of 33 years (1981-2014). Monetary Policy vs. Fiscal Policy: An Overview . Fiscal policy is all about how the government uses its revenue (taxes) and expenditure (spending) to influence the economy. The exchange rate which was initially stabilized between the rate of 155 naira-160 naira/dollar is presently been exchanged at 198.5 naira/dollar at the official or interbank rate and even worst at the parallel or black market rate. This study uses secondary data which were obtained from the Statistical Bulletin of the Central Bank of Nigeria (CBN) covering the period from 1985 to 2015. This study investigated the impact of fiscal and monetary policy on Nigerian economic growth from 1981 to 2015, with the interest in exploring which of fiscal or monetary policy has been effective in propelling economic growth in Nigeria and how GDP growth responds to the monetary and fiscal policy … This is the use of government expenditure and taxation to determine the direction of the economy. With a falling external reserve, unstable exchange rate and very slow growth rate, appropriate macroeconomic policy is needed to safeguard the economy from falling into recession. 2.1.1 The Concept of Policy This paper reviews the impact of financial liberalisation on monetary policy in Nigeria, examining in particular the progress made in the transition from direct to indirect forms of monetary management. Measures taken to rein in an "overheated" economy (usually when inflation is too high) are called contractionary measures. That is when investment is insensitive to interest rate an expansionary monetary policy will have a weak effect on output. 2.1.4 Monetary Policy Suppose money supply increases, what happens to total output? Abstract. The relationship between money supply and prices depends on what happens to V and Y. what happens to them has been the subject of considerable debate over the years between economists. N.A. The legislative and executive branches of government control fiscal policy. The gross domestic product (GDP) is the indicator that measures the rate of economic growth in an economy. Fiscal policy is used in order to compliment the effect of monetary policy of the Central Bank of Nigeria (CBN). We shall use the quantity theory of money to determine this. Overall, the socio-economic and political milieu, including the legal framework under which the Central Bank of Nigeria has operated, was found to be the critical factor that influenced the outcome of monetary policy. will have little or no effect on the economic growth. During the early years of independence (1961-64), which coincided with the second development plan, monetary policy actions were focused on the establishment of a strong financial base and the promotion of domestic financial infrastructure, such as the money and capital market institutions. 43 0 obj <> endobj The inadequate implementation of the varies policies as well as constraints faces. fiscal policy, though the International Monetary Fund (IMF) adds structural reforms as a third strand to complete an effective triad for macroeconomic stabilization. Therefore it can be seen that fiscal and monetary policies are most relevant at this stage of the Nigerian economy in the determining its growth. With oil price falling, Nigeria’s fiscal authorities are faced with significant challenges. Monetary policy can either be expansionary or contractionary. monetary policy in Nigeria and discusses the current monetary policy framework, the instruments used, as well as the operational procedures. - High royalties for the sales Beginning from the era where most of the economic decisions were made by the state, to the era of structural adjustment programme (SAP) in 1986 to the present privatization programme which was initiated in the 1999 government. Since independence various governments in Nigeria have embarked on several economic policies which have been geared towards democratization and development. This paper discusses the evolution of monetary policy in Nigeria in the past four decades. If we assume that other variables (T,C,X and M) remains constant a change in output ΔY as a result of change in government expenditure ΔG will is given by. The following testable hypotheses which are drawn from the research questions are considered appropriate for this study and are therefore subjected to empirical investigation. - Completely free - with ISBN Policy measures taken to increase GDP and economic growth are called expansionary. If the monetary policy have been effectively used, there will be low inflationary trend in the economy, there by increasing or enhance the purchasing power of the citizens. Suppose there is an increase in government expenditure. 2.3 EMPIRICAL REVIEW, 3.1 RESEARCH METHOD Monetary and fiscal policy are also differentiated in that they are subject to different sorts of logistical lags. the framework for monetary policy in Nigeria. The policy implication of these findings is that more strategies needs to be put in place in order to ensure that monetary and fiscal policies taken jointly positively impacts on economic growth the in the shortrun. The annual growth rate is presently as low as 2.35% (Trading Economics). In ensuring monetary stability, the Central Bank through the deposit money banks implements policies that guarantee the orderly development of the economy through appropriate changes in the level of money supply. From our discussion so far, three issues which this study will attempt to focus on emerge. 5 min read 0 ... For whatever they are worth, tools like quantitative easing and outright monetary transactions straddle the monetary and fiscal policy divide. financial sector and the monetary policy framework has worked itself out over the period of adjustment in Nigeria. 4.2 DATA ANALYSIS. endstream endobj startxref Introduction In recent years, the Nigerian economy has been and is expected to remain a source of great motivation for most emerging economies of the world. The government intervenes in undertaking fundamental roles of allocation, stabilization, distribution and regulation especially where or when market proves inefficient or its outcome is socially unacceptable (Usman A. et al: 2011). Impact. increases in monetary policy rate (MPR) to cut down on inflation have a depressing impact on the economy. h�bbd``b`Z$߀N �1$� "��V �|D,�Abg���&F�]@#Չ���� a� During the early years of independence (1961-64), which coincided with the second development plan, monetary policy actions were focused on the establishment of a strong financial base and the promotion of domestic financial infrastructure, such as the money and capital market institutions. Ideally, monetary policy should work hand-in-glove with the national government's fiscal policy. Fiscal deficits and public debt levels in EMEs as a whole have declined substantially. By either impacting on the cost of capital or influencing the availability of credit, by increasing savings, it is known to determine the level of investment in an economy. This study uses secondary data which were obtained from the Statistical Bulletin of the Central Bank of Nigeria (CBN) covering the period from 1985 to 2015. The main objective is to analysis how various components of fiscal policy have contributed to the growth rate of the Nigerian economy. This paper discusses the challenges of Nigeria’s economy problems, causes and the way forward. If the monetary policy have been effectively used, there will be low inflationary trend in the economy, there by increasing or enhance the purchasing power of the citizens. Domestic financing has increased, and the share of foreign currency debt has fallen dramatically. Nigeria: Central Bank stays put in November. At its 23–24 November meeting, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria unanimously decided to maintain the monetary policy rate unchanged at 11.50%, in line with market expectations and on the heels of the second cut this year delivered at the previous September meeting. Download the full project work below in an doc editable format. Fiscal policy is defined as the means by which a government adjusts its levels of spending to mon-itor and influence a nation’s economy (Reem, 2009). Economic growth is a major macroeconomic objective for most economies. Monetary and Fiscal Policy Co-ordination 2 In Nigeria, there were no concrete efforts at policy coordination until recently when the government set up a coordinating committee for monetary and fiscal policies. Policy formulation should factor in the exhaustibility of the natural resources and aim at reducing oil revenue volatility passed on to the economy. The paper examined the impact of monetary policy on economic growth in Nigeria by developing a model that is able to investigate how monetary policy of the government has affected economic growth through the use of multi-variable regression analysis. Ineffective Leadership and Corruption, Over Reliance on Oil, inflation, unemployment, Government policy, Monetary policies, Inadequate The gross domestic product (GDP) can be distinguished into nominal and real. The general objective of the study is to look at the impact of fiscal and monetary policy on the economic growth of Nigeria. Monetary policy is the process by which monetary authority of a country controls the money supply, interest rates, lending rates and other monetary rates in order to ensure price stability, contribute to economic growth, lower employment, maintain predictable exchange rates and ensure general trust in the currency. The excess is the interest. Thus a change in money supply would be given by: Interest rate is an important economic price. According to the Keynesian economics when government increases expenditure and reduces tax, aggregate demand is stimulated and therefore productivity. For about two decades now, the economy has witnessed tremendous growth with about 6.9% average growth rate. Hussain and Siddiqi (2012) test the fundamental relationship between fiscal, monetary policies and institutions in Pakistan. Overall, the socio-economic and political milieu, including the legal framework under which the Central Bank of Nigeria has operated, was found to be the critical factor that influenced the outcome of monetary policy. Then click on the Impact Of Fiscal And Monetary Policy In Controlling Unemployment In Nigeria link that ended with .doc or .pdf. Therefore when the government revenue increases it is also expected that expenditure will increase. The success of monetary policy often depends on the operating economic environment, the institutional framework adopted, and the choice and mix of the instruments used. 0 NIGERIA 4 INTERNATIONAL MONETARY FUND OPTIONS AND STRATEGIES FOR A FISCAL RULE FOR NIGERIA'S OIL WEALTH MANAGEMENT1 1. This %%EOF to influence the economy over a given period of time. An efficient policy could serve as a booster for economic growth in a nation and make it better-off while an inefficient policy producing undesired and unintended effects could impede the growth potential of an economy and make it worse-off.. Money Supply, Interest Rate transmission Mechanism and Economic Growth. Author. %PDF-1.5 %���� Fiscal policy . INSTRUCTIONS: Impact Of Fiscal And Monetary Policy In Controlling Unemployment In Nigeria project material. - When government expenditure rises, national output rises What is the implication of this increase on the national output. A recent interest in macroeconomic policies (fiscal and monetary policy) as a mechanism for achieving economic growth in Nigeria is fueled by the recent fall in the government revenue which is as a result of a fall in the international prices of oil. An expenditure channeled to unproductive expenditure such as purchase of military weapons, expenditure on infrastructure affected during periods of war, welfare expenditures etc. In Zambia, monetary policy conduct was exclusively based on the MAT framework from the early 1990s to March 2012. The dynamic panel data models indicated that both bank lending and monetary policy have a strong influence on industrial growth Olorunfemi and Dotun (2008) used simple regression to assess the impact of monetary policy on the economic performance in Nigeria. This proves that there is a relationship between the dependent variable- real gross domestic product and the independent variables - government expenditure, money supply and interest rate in the long run. Ndiyo and E.B. Economic growth can be defined as an increase in the monetary value of goods and services produced by an economy over a given period of time (usually one year). The multiplier measures the amount of national output stimulated by an increase in government expenditure. A recent interest in macroeconomic policies (fiscal and monetary policy) as a mechanism for achieving economic growth in Nigeria is fueled by the recent fall in the government revenue which is as a result of a fall in the international prices of oil. Total money supply (Ms) consists of deposits in banks and building societies (D) plus cash (C) held by the public. Udah, Dynamics of monetary policy and poverty in a small open economy: The Nigerian experience, Nigerian Journal Economics and Development Matters, 2(4) (2003), 40-68. 3.1.1 Model Specification, 4.1 RESULTS AND FINDINGS Fiscal policy is used in order to compliment the effect of monetary policy of the Central Bank of Nigeria (CBN). Expansionary monetary policy is said to be weak when investment is very insensitive to interest rate. observed that monetary tightening once anticipated in an economy would have no effect on real domestic output in the short-run. It rarely works this way. Examine the effect of monetary policy on inflation in Nigeria… Since the sale of oil is the major source of revenue to the Nigerian government, government expenditure and therefore aggregate demand is drastically affected leading to a very slow growth rate. Fiscal policy is a deliberate action of government aimed at ultimately achieving similar objectives. The specific objectives are to: In Section IV, the lingering problems that constrain the efficiency of Key words: Monetary policy, Fiscal policy, Stock returns, Nigeria. Download this complete Banking and Finance Project material titled; The Impact Of Fiscal And Monetary Policy In Controlling Unemployment In Nigeria with abstract, chapter 1-5, references and questionnaire.Preview chapter one below. 2.1.3 Fiscal Policy In his own, more sophisticated test, including only genuinely social expenditures (which amounts to a somewhat stronger test), Lindert (2004b:172-93) found no significant associations either. In Nigeria, the design and implementation of monetary policy is the responsibility of the Central Bank of Nigeria (CBN). Monetary Policy vs. Fiscal Policy . by Premium Times. �����E� �#j욂��x�h�l����^�g��׫�������O������Ui9�&,^�.o���������?o� ov�tTVkT[���[_.�V���������W�w��o��Z��]ޮ�/67�+������U���?�x��a�q{����j�}��o)�r���⢥$ �S�I����p��? July 1, 2019. The first is to remove any severe deflationary or inflationary gaps. The publication is aimed at enhancing the knowledge base of users by compiling the concepts and explaining them in a unique, simple and reader This study investigated the impact of fiscal and monetary policy on Nigerian economic growth from 1981 to 2015, with the interest in exploring which of fiscal or monetary policy has been effective in propelling economic growth in Nigeria and how GDP growth responds to the monetary and fiscal policy shock. in order to influence the economy. ?-hۚ �{OՋ;�n1+>:oS���ab�,?n��߯77�?֛�����~x�>��|@��V#�_-~Y�`��ӻ-����ӊ��؄3��~x$j���6#�q�M�'ش�Vj�`M9M���&$d�N�#���zy{vy���k��֛��-A�^����b�=��Z�ࣖr!R�w�v��!�1�&U�p�tۣy� �;U�� ���W�|;nB}2���uF��c¤�rf�������Erਜ�2SoB�}屔7hw�'H�j��3������:�A2\�rQ�q] )�R��\}���Gz7�hQ��J�0�\���z�"�G�b,��T}�ns2�۽[�/ޔL����r���I�̧���3�x8��#'�0�a>�x� OC���C��K]�����O =�. Monetary policy is the use of money supply or interest rates to achieve macroeconomic goals, while Monetary Policy and its Effectiveness on Economic Development in Nigeria Author: Akinjare Victoria, A.A. Babajide, Isibor Areghan Akhanolu and Okafor tochukwu Subject: International Business Management Keywords: Monetary policy, growth, development, optiaml rate, foreign investment Created Date: 12/8/2016 10:18:13 AM Keynesians have generally had different views from monetarists and new classical economists. Monetary policy can be used to achieve macroeconomic objectives such as economic growth, balance of payments equilibrium, exchange rate etc. The specific objectives are; 1) To examine the relationship between money supply and real economic growth in Nigeria. This study investigated the effect of fiscal policy on economic growth in Nigeria. Monetary policy in Nigeria has evolved over time. Fiscal policy has two (2) possible roles. fiscal and monetary policies. between monetary policy, fiscal policy and economic growth in case of Pakistan. 2.1.2 Economic Growth 1.0INTRODUCTION. This investigates the three elements of fiscal policy (1) government spending, taxation and the other source of revenue which finance public spending and the resulting budget deficit or surplus which occurs wherever government expenditure does not exactly equal revenue. Speci cally, it estimates and tests the stability of the money demand function for Nigeria using quarterly data from 1981Q1 to 2018Q2 with a view to ascertaining the suitability or otherwise of money Among other factors which are likely to influence this objective is the issue of policies which is very cardinal in determining the growth of the economy. Fiscal Policy vs. Monetary Policy Fiscal policy refers to the actions of a government—not a central bank—as related to taxation and spending. The first is that there are important linkages between FSR in general and the monetary policy framework under indirect controls. This above expression is called the multiplier, in this case government multiplier. Fiscal policy is basically concerned with expenditure and revenue collection of government. Specifically the study intends to; i. Ascertain the effect of monetary policy on co-operant factors in economic growth in Nigeria. November 24, 2020. The result of the findings showed that there is a significant relationship between explanatory variables (government expenditure, interest rate and money supply) taken jointly and the dependent variable (real gross domestic product) in the long run. Both fiscal and monetary policy can be either expansionary or contractionary. This study investigated the effect of fiscal policy on economic growth in Nigeria. To achieve this, fiscal policy was captured here by government expenditures and revenues respectively while monetary policy … This study investigated the impact of fiscal and monetary policy on Nigerian economic growth from 1981 to 2015, with the interest in exploring which of fiscal or monetary policy has been effective in propelling economic growth in Nigeria and how GDP growth responds to the monetary and fiscal policy … Download this complete Banking and Finance Project material titled; The Impact Of Fiscal And Monetary Policy In Controlling Unemployment In Nigeria with abstract, chapter 1-5, references and questionnaire.Preview chapter one below. Also, Okafor, (2012) in his study “Tax Revenue Generation and Nigeria Economic Development” analyzed the monetary and fiscal policy implication Nigeria’s full … LIBRARY 0 3 MAR 200B INSTITUTE of DEVELOPMENT STUDIES Fiscal policy an d poverty alleviation: Some policy options for Nigeria By IDS Library University of Sussex Falmer, Brighto BNn 1 … THE IMPACT OF FISCAL POLICY ON THE NIGERIA ECONOMY. Ikhide, S.I. either only on monetary policy or fiscal policy impact on agricultural output, the present study differs by using a specific measure of agricultural output (food crops only) employing reliable Time Series analysis method, as well as using extended macroeconomic variables (both fiscal and monetary policy instruments) in the model. The key implication is that private sector credit, interest rate, and exchange rate are effective channels for monetary policy transmission in Nigeria, and a policy action should be put in place to effectively harness these key channels to stimulate the real sector of the economy and boost economic activities. Downloadable! Policies may be regarded as a political, management, financial, and administrative mechanisms that are arranged to achieve explicit goals which may apply to government, to private sector organizations and groups, and to individuals (Geurts Thei ). monetary policy coupled with a contractionary fiscal policy will engender natural rate of growth of the Nigerian economy. - Publication as eBook and book �����4�-��h����3�@jȴ�4����ʭ�l����� 2=47�:V��\S��M]؉�h,d(��K����x^�0? Fiscal Expenditure in Nigeria decreased to 2327.80 NGN Billion in the first quarter of 2020 from 2627.38 NGN Billion in the fourth quarter of 2019. policies on stock market returns in Nigeria. Also, monetary policy is more important in alleviating poverty than the fiscal policy which favored the monetary school arguments. Metadata Show full item record. Fiscal policy in oil-producing countries can be profoundly affected by oil revenue uncertainty and volatility. The main objective is to analysis how various components of fiscal policy have contributed to the growth rate of the Nigerian economy. Since the beginning of 2000s, however, the role of fiscal and monetary policy has started to become more active. Specifically, the existence of fiscal dominance, a persistent liquidity overhang, an oli-gopolistic banking system and dualistic financial markets are major systemic factors that have undermined the efficacy of monetary policy in Nigeria. Fiscal policy can be expansionary (i.e. 2) To examine the relationship between interest rate and real economic growth in Nigeria. 2.2 THEORETICAL REVIEW endstream endobj 44 0 obj <><><>]/Order[]>>>>/PageLayout/OneColumn/PageMode/UseNone/Pages 41 0 R/Type/Catalog>> endobj 45 0 obj <>/ProcSet[/PDF/Text]>>/Rotate 0/Type/Page>> endobj 46 0 obj <>stream This forms the rationale behind a good macroeconomic or public policy. The government will however be able to achieve the desired goal if some controls can be maintained on the currency. 55 0 obj <>/Filter/FlateDecode/ID[<745DFBFD92E43A42B5A512FA8447DD54><745DFBFD92E43A42B5A512FA8447DD54>]/Index[43 32]/Info 42 0 R/Length 70/Prev 146396/Root 44 0 R/Size 75/Type/XRef/W[1 2 1]>>stream Despite a diversified economy, Nigeria’s fiscal policy is heavily dependent on the oil sector. Government expenditure can be productive and unproductive (or wasteful). Abstract: Nigeria has been going through a lot of economic problems in the recent years. This paper reviews key aspects of Nigeria’s fiscal and monetary policies with the aim of examining the performance of the policies. The estimated coefficients of the short run model indicate no significant relationship between the dependent variable real gross domestic product and independent variables government expenditure, money supply and interest rates taken together but individually a short run relationship exist between the fiscal variable (government expenditure) and real GDP and between the monetary variable (money supply and interest rate) and real GDP. This may work via changing tax rates or the rules about liability to tax or via changes in government spending on real goods and services or transfer payments. First, the Federal Reserve has the opportunity to change course with monetary policy fairly frequently, since the Federal Open Market Committee meets a number of times throughout the year. 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