Authors :
A. T. Ridwanullahi; T. A. Bature; S. A. Abba; M. K. Apo; G. O. Suleiman; J. F. Eniayebinu
Volume/Issue :
Volume 11 - 2026, Issue 8 - August
Google Scholar :
https://tinyurl.com/yudszwpp
DOI :
https://doi.org/10.38124/ijisrt/26aug724
Note : A published paper may take 4-5
working days from the publication date to appear in PlumX Metrics, Semantic Scholar, and
ResearchGate.
Abstract :
Fiscal policy is widely regarded as a central instrument of macroeconomic management, yet its short-run relationship
with stability outcomes in oil-dependent, low-income economies remains empirically unsettled. This study examines the effect of
fiscal policy on macroeconomic stability in Nigeria using annual data covering 1990 to 2025. Macroeconomic stability is
disaggregated into three indicators real GDP growth, the annual change in inflation, and exchange-rate volatility rather than
treated as a single composite outcome. Fiscal policy is represented by the annual log growth of tax revenue and public debt, with
changes in the interest rate, foreign direct investment, and the exchange rate included as controls. Three short-run dynamic
regression models are estimated by ordinary least squares following unit-root testing, and reported with heteroscedasticityconsistent (HC3) standard errors after diagnostic testing. The results show that tax-revenue growth and public-debt growth are
not jointly significant at the 5 percent level in any of the three models, while lagged GDP growth is a strong and statistically
significant predictor of current growth, pointing to substantial persistence in Nigeria's growth process. Diagnostic tests reveal
heteroscedasticity in the inflation model and non-normal residuals in the growth and exchange-rate-volatility models, both of
which are accommodated through robust inference. The findings suggest that, within a short annual macroeconomic series,
fiscal variables alone provide limited independent explanatory power for stability outcomes in Nigeria, and that broader
structural and external factors are likely to dominate short-run dynamics. Implications for fiscal policy design and
macroeconomic management are discussed.
Keywords :
Fiscal Policy, Macroeconomic Stability, Public Debt, Tax Revenue, Dynamic Regression, Nigeria.
References :
- Alagidede, P., & Ibrahim, M. (2017). On the causes and effects of exchange rate volatility on economic growth: Evidence from Ghana. Journal of African Business, 18(2), 169–193.
- Combes, J.-L., Minea, A., & Sow, M. (2017). Is fiscal policy always counter- (pro-) cyclical? The role of public debt and fiscal rules. Economic Modelling, 65, 138–146.
- Fatás, A., & Summers, L. H. (2018). The permanent effects of fiscal consolidations. Journal of International Economics, 112, 238–250.
- International Monetary Fund. (2025). Regional Economic Outlook: Sub-Saharan Africa. Washington, DC: International Monetary Fund.
- World Bank. (2023). Global Economic Prospects. Washington, DC: World Bank.
Fiscal policy is widely regarded as a central instrument of macroeconomic management, yet its short-run relationship
with stability outcomes in oil-dependent, low-income economies remains empirically unsettled. This study examines the effect of
fiscal policy on macroeconomic stability in Nigeria using annual data covering 1990 to 2025. Macroeconomic stability is
disaggregated into three indicators real GDP growth, the annual change in inflation, and exchange-rate volatility rather than
treated as a single composite outcome. Fiscal policy is represented by the annual log growth of tax revenue and public debt, with
changes in the interest rate, foreign direct investment, and the exchange rate included as controls. Three short-run dynamic
regression models are estimated by ordinary least squares following unit-root testing, and reported with heteroscedasticityconsistent (HC3) standard errors after diagnostic testing. The results show that tax-revenue growth and public-debt growth are
not jointly significant at the 5 percent level in any of the three models, while lagged GDP growth is a strong and statistically
significant predictor of current growth, pointing to substantial persistence in Nigeria's growth process. Diagnostic tests reveal
heteroscedasticity in the inflation model and non-normal residuals in the growth and exchange-rate-volatility models, both of
which are accommodated through robust inference. The findings suggest that, within a short annual macroeconomic series,
fiscal variables alone provide limited independent explanatory power for stability outcomes in Nigeria, and that broader
structural and external factors are likely to dominate short-run dynamics. Implications for fiscal policy design and
macroeconomic management are discussed.
Keywords :
Fiscal Policy, Macroeconomic Stability, Public Debt, Tax Revenue, Dynamic Regression, Nigeria.
