Effect of Fiscal Instability on Economic Growth in Nigeria

Abstract

This study examined the effect of fiscal instability on economic growth in Nigeria for the period of 1970-2010.The cyclical effect of fiscal spending components were measured using the Hodrick Prescot (HP)-filtered fiscal spending components and output with the correlation technique. Results indicated that between 1970 and 1985, both the real gross domestic product and real total fiscal spending were highly volatile. However, total fiscal spending appears to be countercyclical between 1970 to 1986. But from 1987 to 2010, the variation in total fiscal spending was relatively stationary while real output was still relatively unstable. Fiscal discipline is required to ensure a sustainably stable economic environment in Nigeria.