Effect of Monetary and Fiscal Policy Measures on Economic Growth in Nigeria

Abstract

This study empirically investigated the effect of monetary and fiscal policy measures on economic growth in Nigeria from 1985 to 2024. Monetary policy was proxied by broad money supply, lending rate and monetary policy rate, while fiscal policy was proxied by government expenditure and government tax revenue. On the other hand, economic growth was proxied by Real Gross Domestic Product (RGDP). The study adopted an ex-post facto research design and relied on annual time series data sourced from the Central Bank of Nigeria Statistical Bulletin, the World Development Indicators of the World Bank, and the National Bureau of Statistics. Data were analysed using Augmented Dickey-Fuller unit root test, correlation matrix, bounds cointegration test, and the Autoregressive Distributed Lag estimation technique. The findings revealed that broad supply, government expenditure and government tax revenue have significant positive effects on Real Gross Domestic Product in Nigeria in both the short run and long run, while lending rate has a significant negative effect on Real Gross Domestic Product while monetary policy rate exerted a negative but statistically insignificant effect on Real Gross Domestic Product. The study concluded that monetary and fiscal policy measures play a vital and complementary role in driving economic growth in Nigeria. It was recommended, among others, that the Central Bank of Nigeria should calibrate monetary expansion toward productive credit channelling, and that fiscal authorities should prioritize the quality and composition of public spending toward capital and infrastructure projects that reinforce sustainable output growth.