RELATIVE EFFECTIVENESS OF MONETARY AND FISCAL POLICIES ONECONOMIC GROWTH IN NIGERIA

Abstract

This study looks at how well fiscal and monetary policies worked together to boost Nigeria’s economy from 1990 to 2023. It focuses on fiscal policy variables such as taxes and expenditure by the government as well as those of monetary policy like interest rate changes and money supply. The study attempts to determine the best policy for fostering stability and sustained growth by contrasting their effectiveness in various economic circumstances. To investigate the short- and long-term correlations between these variables, the study uses Autoregressive Distributed Lag (ARDL) / Error Correction Model (ECM), because it can handle time series data with variables integrated at multiple orders, the ARDL technique is especially well-suited for this kind of analysis. The primary variables under investigation are the dependent variable (GDP growth) and the independent variables (monetary and fiscal policy indicators). The fiscal policy has a more significant and sustained influence on Nigeria’s long-term economic growth. Government taxes and expenditure are key drivers of growth throughout the studied period, especially during recession periods. On the other hand, monetary policy has little impact on long-term growth but has been more successful in handling pressing short-term problems of inflation and currency stabilization. These findings imply that Nigeria’s economic strategy should place a higher priority on fiscal policy, with an emphasis on enacting tax changes and improving the effectiveness of government expenditure. In general, this research offers significant perspectives for decision-makers who aim to encourage steady economic expansion and stability in Nigeria.