Impact of Fiscal and Monetary Policy on the Economic Development of Nigeria: Empirical Review

Abstract

This study seeks to investigate the impact of fiscal and monetary policy on economic growth in Nigeria: Empirical Review from 1991 to 2021. A good government administration and the monetary authorities can be dictated by the good political and economic state of that nation; hence, an economy has the obligation of enhancing its economic growth and development having in mind the end goal, which is to decrease the level of its debt and maintain price stability. From the studies reviewed, a good number concluded that tax and money supply tools, in some certain periods, have negative impact on the output which indicated that the tools used in their studies reduce their effectiveness and the efficiency of the policies. Other studies concluded that although interest rate has decreased dramatically from 1991 up to 2021, the investment and economic growth rate still increase slowly indicating that the effectiveness of these policies is not high. Consequently, it is necessary to increase the efficiency of fiscal and monetary policy via unblocking the transmission channels such as bank network, financial market, and capital market. This study recommends among others that as regards fiscal policy, government may seek economic expansion by increasing spending (without corresponding tax increases) – like building more federal roads, could increase employment, pushing up demand and growth while the central bank can implement a tight monetary policy by raising interest rates and removing money from circulation.