Fiscal policy and economic development of sub Saharan African Countries
Date
2021-09
Authors
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Journal ISSN
Volume Title
Publisher
Federal University of Technology, Owerri
Abstract
This research work investigated the effect of fiscal policy on economic development of Sub Sahara African Countries with emphasis on Nigeria and Ghana. The objectives of the study were to determine how fiscal policy affects economic growth, human development, Unemployment and poverty rates in Nigeria and Ghana; for the period 1986-2017. The study made use of secondary data collected from, Central Bank of Nigeria Statistical Bulletin, National Bureau of Statistics, Bank of Ghana Statistical Bulletin 2016, Ghana Statistical Services, International Monetary (IMF) Fund financial statistics Year Book and World Bank’s African Database. Econometric tools of Philips-Perron Unit Root Test, Johansen Cointegration test, Vector Error Correction Mechanism and least squared analysis were employed for data analysis. The unit root test conducted showed that all the variables were stationary at first difference. The Johansen Cointegration Test suggested that fiscal policy has a long run relationship with economic development. The results of the Vector Error Correction Mechanism showed that: Fiscal policy has a significant long run relationship with Economic Growth in Nigeria with f statistic 71.1303 (Prob. 0.000) at 5% significance level. Fiscal Policy also has a long run effect on Economic Growth in Ghana showing f statistic value 3.580 (0.00839) at 5% level of significance. Fiscal policy has no significant long run effect on Human Development Index in Nigeria, but Fiscal Policy has a significant short run effect on Human Development Index in Nigeria. Fiscal policy does not have significant effect on poverty reduction in both Nigeria and Ghana.Fiscal policy has no significant long run effect on unemployment in Nigeria with f statistic 1.06894 (Prob. 0.429) at 5% level of significance , while fiscal policy has a significant long run effect on unemployment in Ghana with f statistic 2.7979 (Prob. 0.0280) at 5% level of significance . This works also reveals that recurrent expenditure in Ghana is associated with a 0.8332 unit change in poverty, a -01.9366 unit change in unemployment, a 10.2918 unit change in Human Development Index and a 0.4746 unit change in Gross Domestic product on average ceteris paribus in the long run. Showing, that recurrent expenditure has significant long run effect on unemployment reduction, poverty reduction, Human Development Index and Economic Growth in Ghana in the long run on average ceteris paribus. Based on the findings, the research recommends among others that there is an urgent need to increase expenditure in the direction that will affect the income of the low income earners that will help Nigeria enhance economic growth, enhance the Human Development Index, generate employment and reduce poverty. There is need for a restructured revenue base to emphasis more on tax revenue to reduce the dependence on oil revenue in Nigeria and Ghana in order to finance fiscal policy expansion rather than embarking on borrowing which increases the burden on the poor. This research work has developed a model that defines fiscal policy variables (Tax Revenue, Oil Revenue, Capital Expenditure, Recurrent Expenditure and Deficit Financing). It has also discovered that for Nigeria to achieve a result similar to Ghana in tackling the macro economic problems facing the country, Nigeria government must increase expenditure in the direction that affects the low income earners.
Description
This thesis is for the award of Doctor of Philosophy (Ph.D) in Financial Management Technology
Keywords
Tax revenue, oil revenue, capital expenditure, recurrent expenditure, deficit financing, unemployment, economic growth, human development, poverty reduction, Department of Financial Management Technology
Citation
Njoku, C. O. (2021). Fiscal policy and economic development of sub Saharan African Countries [Unpublished Doctoral Thesis]. Federal University of Technology, Owerri, Nigeria