The impact of government policies on Nigeria economic growth (case of fiscal, monetary and trade policies)

Abstract

This study examines the impact of fiscal, monetary and trade policies on Nigerian economic growth from 1985 to 2020. This study adopts endogenous growth model (AK model) as its theoretical framework. The unit root test results reveal that there is mixed level of stationarity in the variables. The bound test result shows that the variables cointegrate. The ARDL long-run result shows that fiscal policies stimulate economic growth, while on the contrary, trade policies deter Nigerian economic growth. The short-run result shows that the fiscal policies has an inconsistent impact on Nigerian economic growth and thus differs from the long-run result; while government spending continues to drive economic growth in Nigeria, government revenues have no effect on the growth of the economy. The result of the impact of monetary policies shows that interest rate impels growth of the economy while money supply deters growth of Nigeria’s economy; lastly, the trade policies maintain her negative influence on the economy in both the long run and short run. Sequel to the findings, the study recommends the following: Policymakers should place more emphasis on using fiscal policy which was found to be stimulating the country's growth rate. Whenever it is expedient to use monetary policy to stimulate economic growth, policy makers should make use of interest rates as it stimulates the growth of the economy in the short run. The government should review her trade policies to reduce import by encouraging consumption of local products and motivate exporters of goods (raw material) to refine the products before exporting such.