Impact of Fiscal Policies on Sustainable Economic Development in Nigeria

Abstract

The critical policy needs to reconcile the oftencompeting demands of fiscal discipline and sustainable development necessitatesempirically investigating the relationship between fiscal policies and sustainable development in order to resolve contradictory evidence in existing literature. Hence, this study investigates the impact of fiscal policies on sustainable development in Nigeria for the periods of 1990 to 2024. The specific objectives are to determine the impact of public debt, government
spending and tax revenue on sustainable development in Nigeria. The study employed an expost facto research design; it utilized secondary timeseries data sourced from the Central Bank of Nigeria statistical Bulletin and the World Development Indicators. The data analysis followed a time-series econometric approach. After confirming stationarity at first difference via Augmented Dickey-Fuller tests, the Johansen cointegration test identified two significant long-run relationships. A Vector Error Correction Model was then estimated to analyze the dynamics. The findings reveal that in the long run, government spending positively influences sustainable development, while public debt and tax revenue have significant negative effects. The study also shows that public debt, government spending and tax revenue have no significant impact on
sustainable development in the short run. The study concludes that fiscal policies impact on sustainable development is component-specific and long-term in nature. The study recommends prioritizing productive government expenditure, implementing growth-oriented fiscal consolidation to manage debt and reform tax structures to ensure cohesive and sustainable development.