Fiscal Policy Measures and Balance of Payments in NigeriaDennis Brown E1* and Joseph Bidemi O2
- *Corresponding Author:
- Dennis Brown E
Department of Agricultural and Applied Economics/Extension
Rivers State University of Science and Technology
Port Harcourt, Nigeria
E-mail: [email protected]
Received August 11, 2015; Accepted October 28, 2015; Published November 05, 2015
Citation:Brown ED, Bidemi OJ (2015) Fiscal Policy Measures and Balance of Payments in Nigeria. J Glob Econ 3:161. doi:10.4172/2375-4389.1000161
Copyright:© 2015 Brown ED, et al. This is an open-access article distributed under the terms of the Creative Commons Attribution License, which permits
unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.
The paper investigates fiscal policy measures and balance of payments in Nigeria. The main objective of this study is to examine the extent to which fiscal policy measures have influenced the BOP position in Nigeria during the period under study. The study utilized aggregate annual data from 1980 to 2012. The data was analyzed with the co-integration/ ECM method. The major findings are: the test for stationary using Augmented Dickey Fuller (ADF) showed that all the variables were not stationary in levels but were stationary in first difference. The Johansen-Juselius co-integration techniques were employed in testing for long run equilibrium relationship among the variables and the results indicated that co-integrating relationship was found among the variables. The parsimonious ECM result reveals that about 80% of the systematic variation in the dependent variable (BOP) is explained by the three independent variables which are Government Expenditure (GXP) and Government Tax Revenue (GTR) and Government Debt (GTD). Furthermore, the result revealed that government tax revenue has positive and significant effect on BOP in Nigeria, while government expenditure and debt have negative and significant impact on BOP in Nigeria based on the magnitude and the level of significance of the coefficient and p-value. The result also reveals that there is long run relationship between fiscal policy and BOP, as evidenced by the ECM. From the result so far, it is obvious that fiscal policy measures are effective in achieving a favorable balance of payments in Nigeria. The paper concluded that the success of fiscal policy in promoting favorable BOP depends on the level of public revenue available, the direction of public expenditure and its implementation. On the basis of the findings, we recommend amongst others that expansionary fiscal policy measures should be encouraged as they play vital role for the growth of the BOP in Nigeria. Also export promotion and import substitution strategies to increase the non-oil exports in order to achieve a favorable BOP in order to achieve a favorable BOP.