The Effects of Fiscal Policy on Poverty Alleviation in Nigeria

Abstract

The study empirically investigated the link among fiscal policy and poverty alleviation in Nigeria. A choice of variables such as government expenditure on health, government expenditure on education and tax rate were adopted as fiscal policy tools while exchange rate and inflation rate, were also incorporated as control variables. The ARDL short-run and long-run models were estimated to investigate the dynamic relationships between poverty rate, and the array of independent variables in Nigeria from 1980 to 2021. Data used was sourced from World Development Indicators (WDI) and analyzed using the E-Views software. The augmented Dickey-Fuller (ADF) test and Phillips-Perron (PP) unit root test indicated that some of the variables are stationery and others differenced stationary.The result of the ARDL model estimation revealed that government expenditure on health showed a significant positive coefficient, while ggovernment expenditure on education reflected otherwise. Tax rate showed a significant negative effect on the poverty rate while inflation rate and exchange rate impacted poverty negatively. Based on the results, fiscal policy has contributed to poverty rate decrease but not effectively as government budget seem to miss the target. Thus, this study recommends increase in government expenditure budget as well as proper monitoring of government fiscal policies channelled towards poverty alleviation in Nigeria.