TABLE OF CONTENT
Table of content
1.1 Background of the study
1.2 Statement of problem
1.3 Objective of the study
1.4 Research Hypotheses
1.5 Significance of the study
1.6 Scope and limitation of the study
1.7 Definition of terms
1.8 Organization of the study
3.0 Research methodology
3.1 sources of data collection
3.3 Population of the study
3.4 Sampling and sampling distribution
3.5 Validation of research instrument
3.6 Method of data analysis
DATA PRESENTATION AND ANALYSIS AND INTERPRETATION
4.2 Data analysis
The study examined fiscal policy and macroeconomic expenditures by private sector in Nigeria. Primary data were used and collected from the use of questionnaire administered by the researcher to the respondent. The study examine private sector output as proxy for private sector growth, Government Tax, Government Recurrent Expenditure and Government Capital expenditure are employed to measure Government fiscal policy. Hypotheses were formulated and tested using SPSS Chi-square statistics. The study showed that government capital expenditure had a significant impact on private sector output in Nigeria. Government tax had an inverse significant impact on private sector output in Nigeria. Government recurrent expenditure had a significant impact on private sector output in Nigeria.
1.1 Background of the study
The importance of macroeconomic policies and its impact on growth has occupied a central position in the economics literature in recent years both developed and developing economies (Andabai, 2016).Fiscal policy and its impact on private sector growth in Nigeria has been identified as one of the areas in the economics literature that can quicken the pace of growth and development in an economy such as Nigeria. The empirical studies carried out by (Omitogun and Ayinla, 2007)reveals that increase in government expenditure would lead to growth and development of the private sector. The implication is that more percentage of the total expenditure should be spent on capital projects which contributed to the growth and development of the private sector. Efficient and effective government fiscal policy serves as a catalyst for private sector growth and development in any modern economy (Nzotta, 2014). Some empirical studies conducted by (Okemini & Uranta, 2008)and (Andabai, 2014) on the impact of government fiscal policy on private sector growth in Nigeria. Their studies identified gross mismanagement/misappropriation of public funds, corruption, inconsistent economic policies, political and economic instability, absence of harmonization and coordination of fiscal policies as some of the challenges affecting the sector. Others includes: imprudent public spending, weak sectoral linkages and other socio-economic problems constitute the bane of rapid private sector growth and development in Nigeria. Thus, these conflicting problems create a knowledge gap in this study; and, it is against this background that this study attempts to examine the impact of government fiscal policy on private sector growth in Nigeria. The main objective of the study is to examine the impact of government fiscal policy on private sector growth in Nigeria. Fiscal policy are government measures designed to influence the quantum and allocation of revenue and expenditure with the aim to achieving internal and external economic balance, as well as sustainable development. For optimum results, fiscal policy must have a handshake with monetary policy to achieve the primary goal of welfare maximization for the citizenry, which is facilitated by internal and external economic stability as well as sustainable development. The current dwindling concern is that large and growing governments have deleterious effect on the long-run growth of their economies. The usual policy prescription calls for a scaling back of government activity and budgets, constraining public spending from growing faster than output. In countries facing fiscal imbalances and high debt burdens, this has prompted wide-ranging fiscal consolidation programs to reduce government spending (IMF, 2003). However, parallel to this thrust has been a call for fiscal space in which governments argue for room in their budgets to allow for the provision of productive public goods that will foster economic growth (Heller, 2005). The realization of this growth undoubtedly is not automatic but requires policy guidance, which are Fiscal and Monetary policy instruments which are the main instruments of achieving the macroeconomic targets. The basic fiscal policy instruments are Government Expenditure and Tax revenue. To most economist all over the world, fiscal policy has been an important growth determinant of any country, this deep seeded belief that increase in taxation, public investment, Maintaining Surplus Budget, wage control, inflation and other aspect of fiscal policy instrument contribute more to the growth determinant of any country both developed and developing countries. Vast researches have been done on the nature of fiscal policy and the economic growth for years, most of the studies considered fiscal policy impact on the development of economy in both the developed and developing countries. However, recent literatures have justified the need to jointly take into consideration fiscal policy and economic growth in an economic model and economic techniques for unbiased result. Marzie and Safdari (2011) asserted that there is a linkage between fiscal policies variables of gross domestic product growth rate, growth of exchange rate, growth of the price index of goods and services, and growth of government. This conclusion was in conformity with several studies that have been carried out worldwide to investigate the nature of relationship that exists between fiscal policy and economic growth, but not much have been done in Africa most especially in Nigeria. studies carried out in Nigeria have not been able to effectively resolve the issues on the problem of fiscal policy and economic growth ,some of them propose that there is no positive relationship between fiscal policy and economic growth while a few of them find the evidence to support the motion, as some of them make use of the Keynesian approach and while some focus on the effectiveness of this policy measure in stimulating economic growth in this country during regulation and deregulation periods. The intent of fiscal policy is essentially to stimulate economic and social development by pursuing a policy stance that ensures a sense of balance between taxation, expenditure and borrowing that is consistent with sustainable growth. However, the extent to which fiscal policy engenders economic growth continues to attract theoretical and empirical debate in developing and advanced countries. During the global recession and financial crisis of 2008 and onward, most advanced countries implemented a variety of active fiscal policies as large stimulus packages to mitigate this recession. In particular, since monetary policy options are restricted by the very low interest rates, which were central features of this recession, most governments relied much more on fiscal policy. For example, the U.S. enacted unprecedented fiscal expansion including the American Recovery and Reinvestment Act (ARRA) of 2009 which was a combination of tax cuts, transfers to individuals and states, and government purchases equal to 5.5% of GDP Auerbach (2012). In 2008, the EU adopted the European Economic Recovery Plan (EERP) equivalent to 1.5 % of the EU GDP Beetsma and Giuliodori (2011). These examples are just a subset of the stimulus packages by G20 governments. According to Gemmell (2011), much larger G20 stimulus packages worth $15 trillion over 2009-2010 were announced in 2009, expecting to stimulate GDP by 4% compared to the ‘no stimulus’ alternative. However, these large-scale fiscal stimulus packages have triggered a lively debate about the effectiveness of fiscal policy regulations. Until the early 1980s, fiscal policy was widely regarded as a useful tool for economic stabilization. However, its failure to boost economic growth in the wake of the oil shocks of the 1970s, and the associated increase in budget deficit and public debts, have led a lot of economists to be skeptical about the effectiveness of fiscal policy to smoothen cyclical fluctuations (Beetsma and Giuliodori, 2011), and fiscal policy has received less attention (Afonso and Sousa, 2012). While policymakers continued to rely heavily on active fiscal policy as a policy instrument, as demonstrated during the current global recession, academic researchers have not reached a consensus about the effects of fiscal policy on macroeconomic variables, or about the magnitude of such effects.
1.2 STATEMENT OF THE PROBLEM
In recent years, the growth and performance of key macroeconomic indicators in many developing countries has decelerated. The current recession and tightening of global financial conditions in addition to financial market volatility may lead to a decrease or reversals of capital inflows. Since the risk to capital flows can limit monetary policy in these countries, the choice of fiscal policy as a countercyclical tool becomes highly essential. Fiscal policy as a tool of macroeconomic management is central to the health of any economy, as the tax and expenditure policy of the public sector affects the disposable income of individuals and business organizations. Hence, effective fiscal policy operations will ensure a sound balance of payment and price stability that will provide the atmosphere needed for sustainable economic growth and development. It is against this backdrop that the researcher intend to examine the effect of fiscal policy and macroeconomic expenditures by private sector in Nigeria with literature ranging from 1996-2017
1.3 OBJECTIVE OF THE STUDY
The main objective of this study is to examine fiscal policy and macroeconomic expenditures by private sector in Nigeria, but to aid the completion of the study, the researcher intends to achieve the following specific objective
- i) To ascertain the effect of fiscal policy and macroeconomic expenditure on private sector growth in Nigeria
- ii) To ascertain if there is any significant relationship between fiscal policy and macroeconomic policy in Nigeria
iii) to examine the impact of fiscal policy on Nigeria economic growth
- iv) To examine the role of government in fiscal policy formulation and implementation by privet sector.
1.4 RESEARCH HYPOTHESES
The following research hypotheses were formulated by the researcher to aid the completion of the study
H0: there is no significant relationship between fiscal policy and macroeconomic policy in Nigeria
H1: there is a significant relationship between fiscal policy and macroeconomic policy in Nigeria
H0: fiscal policy does not have any significant impact on Nigeria economic growth
H2: fiscal policy does have a significant impact on Nigeria economic growth
1.5 SIGNIFICANCE OF THE STUDY
It is believed that at the completion of the study, the findings will be of great importance to the ministry of finance and federal inland revenue service as the study seek to explore the effect of fiscal policy and macroeconomic expenditure by private sector in Nigeria. The study will also be of great importance to researchers who intend to embark on a study in a similar topic as the study will serve as a guide to further research, the study will also be of great importance to the private sector of the economy as this study will give the key players an insight on the fiscal policy of the government and how it affect the private sector. Finally the study will be of importance to researchers, academia’s students, teachers and the general public as the study will contribute significantly to the pool of existing literature on the subject matter and also add to knowledge.
1.6 SCOPE AND LIMITATION OF THE STUDY
The scope of the study covers fiscal policy and macroeconomic expenditures by private sector1996-2017, but in the cause of the study, there were some factors that limited the scope of the study;
- Data collection: Well established data are not easily available.
- Sizeable quantity of information obtained from papers were in organization and sometimes complex.
- Reluctance of the respondent to fill the questionnaires.
1.7 OPERATIONAL DEFINITION OF TERMS
Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation’s economy. It is the sister strategy to monetary policy through which a central bank influences a nation’s money supply
Macroeconomics is a branch of the economics that studies how the aggregate economy behaves. In macroeconomics, a variety of economy-wide phenomena is thoroughly examined such as inflation, price levels, rate of growth, national income, gross domestic product (GDP) and changes in unemployment
Expenditure is an outflow of money to another person or group to pay for an item or service, or for a category of costs. For a tenant, rent is an expense. For students or parents, tuition is an expense. Buying food, clothing, furniture or an automobile is often referred to as an expense
The private sector is the part of the economy, sometimes referred to as the citizen sector, which is run by private individuals or groups, usually as a means of enterprise for profit, and is not controlled by the State.
1.8 9 ORGANIZATION OF THE STUDY
This research work is organized in five chapters, for easy understanding, as follows. Chapter one is concern with the introduction, which consist of the (background of the study), statement of the problem, objectives of the study, research questions, research hypotheses, significance of the study, scope of the study etc. Chapter two being the review of the related literature presents the theoretical framework, conceptual framework and other areas concerning the subject matter. Chapter three is a research methodology covers deals on the research design and methods adopted in the study. Chapter four concentrate on the data collection and analysis and presentation of finding. Chapter five gives summary, conclusion, and recommendations made of the study.