IMPACT OF FISCAL AND MONETARY POLICIES ON THE NIGERIAN ECONOMIC GROWTH
ABSTRACT
This study examined the impact of fiscal and monetary policies on Nigeria economic growth. In light of the empirical review and other discussions, a number of questions arose as to whether there is a relationship between government expenditure, interest rate, balance of payment, money supply and Nigeria economic growth. Using the Ordinary Least Square (OLS) regression technique with the aid of computer software, the empirical findings revealed among other things that there is no significant relationship between government expenditure, balance of payment and Nigeria economic growth and also there is a significant relationship between money supply, interest rate and Nigeria economic growth. The researcher therefore suggests that sound monetary policies that ensure adequate supply of money to the economy should continue to receive the utmost attention of the managers of the nation’s economy to bring the level of inflation in Nigeria to under single digit rate perpetually.
 TABLE OF CONTENTS
CHAPTER ONE: INTRODUCTION
1.1    Background of the Study                    
1.2    Statement of the Research Problem                
1.3    Objectives of the Study                        
1.4     Research Hypothesis                        
1.5     Scope of the Study                        
1.6     Significance of the Study                    
1.7      Limitation of the Study                        
CHAPTER TWO: LITERATURE REVIEW
2.1    Introduction                             
2.2    Monetary Policy: Conceptual Framework        
2. 3    Theoretical/Analytical Perspectives of Monetary
Policy                                
2.4    An Appraisal of Monetary Policy in Nigeria        
2.5    Theoretical Review of Fiscal Policy                
2.6    Fiscal Policy and Economic Growth: Empirical Evidence                                
2.7    The Link between Government and Economic Development                    
2.8    Monetary and Fiscal Policies Prior to SAP            
2.9    SAP, Monetary and Fiscal Policies and Economic Development                         
CHAPTER THREE: METHODOLOGY OF THE STUDY
3.1    Introduction                            
3.2    Model Specification                        
3.3    Estimation Technique                        
3.4    Sources of Data                            


CHAPTER FOUR: EMPIRICAL ANALYSIS
4.1    Introduction                            
4.2     Correlation Analysis                        
4.3    Regression Analysis                        
CHAPTER FIVE: SUMMARY, RECOMMENDATIONS AND CONCLUSION
5.1     Summary of Findings                        
5.2     Recommendations                            
5.3     Conclusion                                
    References                                
    Appendices                                
 CHAPTER ONE
INTRODUCTION
1.1    BACKGROUND OF THE STUDY
    Since its establishment in 1959, the Central Bank of Nigeria (CBN) has continued to play the traditional role expected of a Central Bank, which is the regulation of the stock of money in such a way as to promote the social welfare (Ajayi, 1999). This role is focused on the use of monetary policy that is usually targeted towards the achievement of full-employment equilibrium, rapid economic growth, price stability and external balance (Fasanya et al, 2013 Adesoye at al, 2012). The realization of macroeconomic goals undoubtedly is not automatic but requires policy guidance. This policy guidance represents the objective of economic policy, fiscal and monetary policy instrument which are the main instruments of achieving the macroeconomic targets.
    According to Naime (2008), in contemporary economies, the Central Bank is the authority with the mandate of manipulating monetary policy; through monetary policy tools, toe achieving desires macroeconomic objectives which include; the achievement of price stability with respect to both domestic and external prices. In the same vein uses inflation rate to track movement in the domestic price while exchange rate, policy are used as tool in ensuring external stability thereby enhancing export performance in the economy. The debate on the effectiveness of fiscal policy as a tool for promoting growth and development remains inconclusive given the conflicting results of current studies (Adeoye, 2006).
    Over the last decade, the growth impact of fiscal policy has generated large volume of both theoretical and empirical literature. However, most of these studies  paid more attention to developed economies and the inclusion of developing countries in case of cross-country studies were mainly to generate enough degrees of freedom in the course of statistical analysis (Aregbeyen, 2007). Fiscal and monetary policies are inextricably linked in macro-economic management; development in one sector directly affect development in the other. Undoubtedly, fiscal policy is central to the health of any economy, as government’s power to tax and to spend affects the disposable income of citizens and corporations, as well as the general business climate.
    Monetarist strongly believes that monetary policy exact greater impact on economic activity as unanticipated change I n the stock of money affects output and growth i.e., the stock of money must increased unexpectedly for Central Bank to promote economic growth. In fact, they are of the opinion that an increase in government spending would crowd out private sector and such an outweigh any short (Adefesa and Mobolaji, 2011). On the other hand, the concept of liquidity trap which is a situation in which real interest rates cannot be reduced by any Action of the monetary authorities was introduce by Keynesian economics. Hence, at liquidity trap an increase in the money supply would not stimulate economic   growth because of the downward pressure of investment owing to insensitivity of interest rate to money supply. John Maynard Keynes recommends fiscal policy by stimulating aggregate demand in order to curtail unemployment and reducing it in order to control inflation. While there are several studies on this  debates between Keynesian and monetarist in the developed countries, only fragmented evidence have been provided on this issues in the case of Nigeria (Adefeso and Mobolaji, 2011).
    Ogbole, (2010) lamented that, in spite of many and frequently  changing in fiscal, monetary and other macroeconomic policies, Nigeria has not been able to harness her economic potentials for rapid economic development. These policies span through two broad periods, which can be classified as regulation “and deregulation”.
    In the light of this, the researcher intends to empirically analyse the impact of fiscal and monetary policy on Nigeria economic growth.
1.2    STATEMENT OF THE RESEARCH PROBLEM
    Fiscal and monetary policy is known to be a vital instruments that a country can deploy for the  maintenance of domestic price and exchange rate stability as a critical condition for the achievement of a sustainable economic growth and external viability.
    Its role in ensuring an overall macroeconomic stability cannot be overemphasized. Although in Nigeria, appreciable progress has been made in this regard since the introduction of various financial sector reform programs in 1986. Despite the foregoing, the Nigerian fiscal and monetary policy has continued to face several challenges. No wonder, the aspect of price stability, recognizing the relevance of macroeconomic stability for economic sustainable output and employment growth.
    Against this backdrop, the following research question are raised:
1)    Is there a significant relationship between government expenditure and Nigeria economic growth?
2)    Is there a significant relationship between interest rate and Nigeria economic growth?
3)    Is there a significant relationship between balance of payment and Nigeria economic growth?
1.3    OBJECTIVES OF THE STUDY
    The broad objective of this study is to examine the impact of fiscal and monetary policies on Nigeria economic growth.
    This study is specially undertaken to achieve the following objectives.
1.    To determine the relationship between government expenditure and Nigeria economic growth
2.    To find out the relationship between interest rate and Nigeria  economic growth
3.    To verify the relationship between balance of payment and Nigeria economic growth
1.4     RESEARCH HYPOTHESIS
The hypothesis formulated for the study is:
1.    Ho: there is no significant relationship between government expenditure and Nigeria economic growth.
Hi there is a significant relationship between government expenditure and Nigeria economic growth
2.    Ho: There is no significant relationship between interest rate and Nigeria economic growth
Hi: there is a significant relationship between interest rate and Nigeria economic growth
3.    Ho: there is no significant relationship between balance of payment and Nigeria economic growth
Hi: there is a significant relationship between balance of payment and Nigeria economic growth
The above hypothesis were designed to facilitate investigation into the problem and are subject to empirical testing.
1.5     SCOPE OF THE STUDY
It is well known fact around the globe that there is no limitation to knowledge. As a result of the above fact, the scope of this research work will be limited to the Nigerian  economy vis-a- vis the impact of  fiscal and monetary  policy in Nigeria. Temporary or in term of time series, a period of thirty – three (33) years is used i.e. 1980 to 2012 using some macro economic Variables as a means of assessing the impact of fiscal and monetary policy and Nigeria economic growth.
1.6     SIGNIFICANCE OF THE STUDY
This research work on its conclusion together with whatever solution or finding that may arise will prove useful to some particular group of persons or  otherwise for various reasons  in accordance with their varying needs.
Beneficiaries:
-    Stakeholders: this study will be important and beneficial to stakeholders of an organization to know  the essence of fiscal and monetary policy in Nigeria.
-    The Government: it will acquaint the government of the importance of fiscal and monetary policy and how it should be properly managed.
-    The public: this study will help to restore the lost confidence of the public as regard fiscal and monetary policy  in Nigeria.
-    Academic/ future researcher: both academic and other future researchers in this similar  subject matter will find it a useful source  of learning and research.
1.7      LIMITATION OF THE STUDY
The weakness of this study lies on the vastness of the topic and amount of time required obtaining the relevant data and information necessary for the research coupled with the paucity of statistical data in Nigeria  and where data are available, the disjointed nature of data. The researcher anticipates some challenges in gathering  necessary statistical data spanning over thirty three (33) years for the purpose of this. Also, there is the tendency in the measurement of economic relationship due to the use of time series data.