THE IMPACT OF FISCAL POLICY ON THE NIGERIA ECONOMY. Nigeria: Central Bank stays put in November. Ndiyo and E.B. What is the implication of this increase on the national output. Fiscal policy and monetary policy are two major policy drivers of a nation’s economic performance. This forms the rationale behind a good macroeconomic or public policy. NIGERIA 4 INTERNATIONAL MONETARY FUND OPTIONS AND STRATEGIES FOR A FISCAL RULE FOR NIGERIA'S OIL WEALTH MANAGEMENT1 1. policies on stock market returns in Nigeria. Understanding Nigeria’s Monetary Policy, By Uddin Ifeanyi. �����4�-��h����3�@jȴ�4����ʭ�l����� 2=47�:V��\S��M]؉�h,d(��K����x^�0? increases in monetary policy rate (MPR) to cut down on inflation have a depressing impact on the economy. Empirical studies have shown that there are large variations in social expenditures between countries. Government expenditure can be productive and unproductive (or wasteful). to influence the economy over a given period of time. This is because whether seen from the point of view of cost of capital or from the perspective of opportunity cost of funds, interest rate has fundamental implications for the economy. 2.2.1 Fiscal Policy and Economic Growth Any borrower normally has to pay the lender more than the principal originally received. These hypotheses are stated in their null context as follows: H0: Fiscal does not significantly influence economic growth in Nigeria, H0: Monetary policy does not significantly influence economic growth in Nigeria, H0: Fiscal and monetary policies taken jointly does not significantly influence economic growth in Nigeria. Since the sale of oil is the major source of revenue to the Nigerian government, government expenditure and therefore aggregate demand is drastically affected leading to a very slow growth rate. November 24, 2020. - The increase in national output is larger than the increase in consumption. h�bbd``b`Z$߀N �1$� "��V �|D,�Abg���&F�]@#Չ���� a� In Zambia, monetary policy conduct was exclusively based on the MAT framework from the early 1990s to March 2012. will have little or no effect on the economic growth. First, the Federal Reserve has the opportunity to change course with monetary policy fairly frequently, since the Federal Open Market Committee meets a number of times throughout the year. This is contrary to persuasive monetary policy advice for inflation targeting pursued by central banks and the International Monetary Fund (IMF). Monetary policy and fiscal policy refer to the two most widely recognized tools used to influence a nation's economic activity. - It only takes five minutes Also, expansionary monetary policy which includes increase in money supply, decrease in borrowing interest rate and cash reserve ratio and an increase in liquidity ratio is expected to stimulate the economy. Measures taken to rein in an "overheated" economy (usually when inflation is too high) are called contractionary measures. The inadequate implementation of the varies policies as well as constraints faces. Hussain and Siddiqi (2012) test the fundamental relationship between fiscal, monetary policies and institutions in Pakistan. Beginning from the era where most of the economic decisions were made by the state, to the era of structural adjustment programme (SAP) in 1986 to the present privatization programme which was initiated in the 1999 government. Monetary Policy and its Effectiveness on Economic Development in Nigeria Author: Akinjare Victoria, A.A. Babajide, Isibor Areghan Akhanolu and Okafor tochukwu Subject: International Business Management Keywords: Monetary policy, growth, development, optiaml rate, foreign investment Created Date: 12/8/2016 10:18:13 AM �����E� �#j욂��x�h�l����^�g��׫�������O������Ui9�&,^�.o���������?o� ov�tTVkT[���[_.�V���������W�w��o��Z��]ޮ�/67�+������U���?�x��a�q{����j�}��o)�r���⢥$ �S�I����p��? 2.2.2 Monetary Policy and Economic Growth The success of monetary policy often depends on the operating economic environment, the institutional framework adopted, and the choice and mix of the instruments used. Among other factors which are likely to influence this objective is the issue of policies which is very cardinal in determining the growth of the economy. Nigeria is not enjoying price stability in the least. Monetary and Fiscal Policy Co-ordination 2 In Nigeria, there were no concrete efforts at policy coordination until recently when the government set up a coordinating committee for monetary and fiscal policies. 55 0 obj <>/Filter/FlateDecode/ID[<745DFBFD92E43A42B5A512FA8447DD54><745DFBFD92E43A42B5A512FA8447DD54>]/Index[43 32]/Info 42 0 R/Length 70/Prev 146396/Root 44 0 R/Size 75/Type/XRef/W[1 2 1]>>stream It is the demand side economic policy implemented by the government to achieve macroeconomic objectives like growth, consumption, liquidity and inflation. Format: PDF and MS Word (DOC) pages = 65 ₦ 3,000 Monetary policy involves the management of money, the supply of money and interest rate. Abstract. Fiscal policy is all about how the government uses its revenue (taxes) and expenditure (spending) to influence the economy. Economic growth can be defined as an increase in the monetary value of goods and services produced by an economy over a given period of time (usually one year). Monetary Policy and its Effectiveness on Economic Development in Nigeria Author: Akinjare Victoria, A.A. Babajide, Isibor Areghan Akhanolu and Okafor tochukwu Subject: International Business Management Keywords: Monetary policy, growth, development, optiaml rate, foreign investment Created Date: 12/8/2016 10:18:13 AM 2.1.2 Economic Growth At its 23–24 November meeting, the Monetary Policy Committee (MPC) of the Central Bank of Nigeria unanimously decided to maintain the monetary policy rate unchanged at 11.50%, in line with market expectations and on the heels of the second cut this year delivered at the previous September meeting. Metadata Show full item record. 4.2 DATA ANALYSIS. How to upload Impact Of Fiscal And Monetary Policy In Controlling Unemployment In Nigeria similar papers. However no significant correlation have been found between social expenditures on one hand and the level of growth of GDP on the other (Lindert: 2004). Monetary policy can either be expansionary or contractionary. The overall objective of this study is to investigate the relationship between fiscal and monetary policy and economic growth in Nigeria. Okunrounmu, T.O., Fiscal policies of the federal government strategies since 1986, Central Bank of Nigeria, Economic and Financial Review, 31(4) (1993), 340-350. The specific objectives are to: For about two decades now, the economy has witnessed tremendous growth with about 6.9% average growth rate. Also countries with high private welfare expenditures should theoretically be more efficient. Download the full project work below in an doc editable format. Please, sit back and study the below research material carefully. The gross domestic product (GDP) is the indicator that measures the rate of economic growth in an economy. The key implication is that private sector credit, interest rate, and exchange rate are effective channels for monetary policy transmission in Nigeria, and a policy action should be put in place to effectively harness these key channels to stimulate the real sector of the economy and boost economic activities. 1.0INTRODUCTION. The specific objectives are; 1) To examine the relationship between money supply and real economic growth in Nigeria. the framework for monetary policy in Nigeria. endstream endobj startxref Government Expenditure and Economic Growth, The Keynesian model which explains the relationship between government expenditure and economic growth is given as, Abbildung in dieser Leseprobe nicht enthalten. FISCAL POLICY AND POVERTY ALLEVIATION: SOME POLICY OPTIONS FOR NIGERIA Benneth O. Obi AFRICAN ECONOMI RESEARCC CONSORTIUH M CONSORTIUM POU LR A RECHERCH ECONOMIQUE EEN AFRIQUE . h�b```�,�� ��ea�h`p r�&�Nae��� �$���Y�������\2�QP��Ƴ�enm��hP�` iĥ �F���g7��� �0h�:v[���LZL%L�LLE��^0�3��Qd`�����@� ("� Download this complete Banking and Finance Project material titled; The Impact Of Fiscal And Monetary Policy In Controlling Unemployment In Nigeria with abstract, chapter 1-5, references and questionnaire.Preview chapter one below. DO NOT copy word for word. The economy thus multiplies the increase in government expenditure into an even larger increase in output that is why it is called a multiplier. Fiscal policy is used in order to compliment the effect of monetary policy of the Central Bank of Nigeria (CBN). - Publication as eBook and book In addition, the study argued that monetary policy is more effective than fiscal policy in Pakistan. The exchange rate which was initially stabilized between the rate of 155 naira-160 naira/dollar is presently been exchanged at 198.5 naira/dollar at the official or interbank rate and even worst at the parallel or black market rate. One of the major objectives of monetary and fiscal policies in any economy is the achievement and maintenance of economic growth. With oil price falling, Nigeria’s fiscal authorities are faced with significant challenges. The excess is the interest. The coefficient of error correction term is -0.02 showing a 2% yearly adjustment towards the long run equilibrium. INSTRUCTIONS: Impact Of Fiscal And Monetary Policy In Controlling Unemployment In Nigeria project material. Economic growth is a major macroeconomic objective for most economies. In theory Keynesians and Neoclassical economists provided various macroeconomic policy tools of government intervention which are broadly grouped into fiscal and monetary policies While monetary policy has to do with the process by which monetary authorities of a country controls monetary aggregates (such as money supply, interest rate, inflation rate etc.) Fiscal policy is basically concerned with expenditure and revenue collection of government. The government intervenes in undertaking fundamental roles of allocation, stabilization, distribution and regulation especially where or when market proves inefficient or its outcome is socially unacceptable (Usman A. et al: 2011). 1.2 STATEMENT OF RESEARCH HYPOTHESIS, 2.1 Conceptual Framework ]m܍9$ԗ��"�{�-�n\�,\6�3�L�:���R-�H?Kej����K��Yoԁ�%'��v�G���l�u��8a��د �W�4����T�+��:�c�J?�G� Despite the lofty place of fiscal policy in the management of the economy, the Nigerian economy is yet to come on the path of sound growth and development. Fiscal policy is the use of taxation and government spending to influence the economy. The result of this study does not support the assertion that a tight monetary policy coupled with a contractionary fiscal policy will engender natural rate of growth of the Nigerian economy. This paper reviews the impact of financial liberalisation on monetary policy in Nigeria, examining in particular the progress made in the transition from direct to indirect forms of monetary management. increasing government expenditure and reducing the tax rate) or contractionary (reducing the government expenditure and increasing the tax rates). It is the demand side economic policy implemented by the government to achieve macroeconomic objectives like growth, consumption, liquidity and inflation. Fiscal policy is a deliberate action of government aimed at ultimately achieving similar objectives. In Nigeria, the design and implementation of monetary policy is the responsibility of the Central Bank of Nigeria (CBN). either only on monetary policy or fiscal policy impact on agricultural output, the present study differs by using a specific measure of agricultural output (food crops only) employing reliable Time Series analysis method, as well as using extended macroeconomic variables (both fiscal and monetary policy instruments) in the model. Fiscal policy … The publication is aimed at enhancing the knowledge base of users by compiling the concepts and explaining them in a unique, simple and reader The first is to remove any severe deflationary or inflationary gaps. - High royalties for the sales The government will however be able to achieve the desired goal if some controls can be maintained on the currency. In Section IV, the lingering problems that constrain the efficiency of LIBRARY 0 3 MAR 200B INSTITUTE of DEVELOPMENT STUDIES Fiscal policy an d poverty alleviation: Some policy options for Nigeria By IDS Library University of Sussex Falmer, Brighto BNn 1 … Speci cally, it estimates and tests the stability of the money demand function for Nigeria using quarterly data from 1981Q1 to 2018Q2 with a view to ascertaining the suitability or otherwise of money Government leaders get re-elected for reducing taxes or increasing spending. fiscal policy, though the International Monetary Fund (IMF) adds structural reforms as a third strand to complete an effective triad for macroeconomic stabilization. In short, fiscal measures as well as monetary measures go side by side to achieve the objectives of economic growth and stability. That is when investment is insensitive to interest rate an expansionary monetary policy will have a weak effect on output. 2.2 THEORETICAL REVIEW (iii) Examine the joint impact government expenditure, money supply and interest rates on real GDP in Nigeria. Fiscal Expenditure in Nigeria averaged 1400.82 NGN Billion from 2010 until 2020, reaching an all time high of 2627.38 NGN Billion in the fourth quarter of 2019 and a record low of 743.65 NGN Billion in the first quarter of 2011. The policy implication of these findings is that more strategies needs to be put in place in order to ensure that monetary and fiscal policies taken jointly positively impacts on economic growth the in the shortrun. In Nigeria, the monetary policy is the macroeconomic policy laid down by the Central Bank of Nigeria. By either impacting on the cost of capital or influencing the availability of credit, by increasing savings, it is known to determine the level of investment in an economy. Fiscal policy in oil-producing countries can be profoundly affected by oil revenue uncertainty and volatility. This In Nigeria, the monetary policy is the macroeconomic policy laid down by the Central Bank of Nigeria. - When government expenditure rises, national output rises The gross domestic product (GDP) can be distinguished into nominal and real. Interest rate has been defined as the cost of credit. But what determines the impact of government expenditure on economic output is dependent on the kind of expenditure it is been channeled to. observed that monetary tightening once anticipated in an economy would have no effect on real domestic output in the short-run. Also, monetary policy is more important in alleviating poverty than the fiscal policy which favored the monetary school arguments. According to the Keynesian economics when government increases expenditure and reduces tax, aggregate demand is stimulated and therefore productivity. If we assume that other variables (T,C,X and M) remains constant a change in output ΔY as a result of change in government expenditure ΔG will is given by. N.A. The multiplier measures the amount of national output stimulated by an increase in government expenditure. Ikhide, S.I. Monetary policy can be used to achieve macroeconomic objectives such as economic growth, balance of payments equilibrium, exchange rate etc. Time series data were derived from the Central Bank of Nigeria statistical bulletin, while the method of analysis was the Johansen Cointegration test, vector error correction method and the Wald test of coefficient. The policy is used along with monetary policy in different com-binations to direct a country’s goals. Monetary policy is the adjustment of monetary aggregates such as money supply, interest rate, inflation rate, cash reserve ratio, liquidity ratio etc. %%EOF The legislative and executive branches of government control fiscal policy. ii. This study investigated the effect of fiscal policy on economic growth in Nigeria. CENTRAL BANK OF NIGERIA Monetary Policy Department ‘Fiscal Policy at a Glance’ explains fiscal policy and related concepts using graphical illustrations. Monetary policy implementation by central bank of Nigeria have some position returns if it is wisely applied, but the monetary policy becomes a problem when it conflits among the objections and instruments of monetary policy and other policies as well as the constraints if faces. Therefore it can be seen that fiscal and monetary policies are most relevant at this stage of the Nigerian economy in the determining its growth. In Nigeria, monetary policy has been used since the Central Bank of Nigeria (CBN) was saddled the responsibility of formulating and implementing monetary policies by Central Bank Act of 1958. Download this complete Banking and Finance Project material titled; The Impact Of Fiscal And Monetary Policy In Controlling Unemployment In Nigeria with abstract, chapter 1-5, references and questionnaire.Preview chapter one below. Fiscal policy . The study examined the impact of government fiscal and monetary policies on economic growth within the period of 33 years (1981-2014). As a result, they adopt an expansionary fiscal policy. Overall, the socio-economic and political milieu, including the legal framework under which the Central Bank of Nigeria has operated, was found to be the critical factor that influenced the outcome of monetary policy. 2.1.3 Fiscal Policy Monetary policy is the use of money supply or interest rates to achieve macroeconomic goals, while An expansionary monetary policy increases the supply of money more rapidly, while a contractionary monetary policy expands money supply more slowly. 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