Fiscal Policy Option for Sustainable Development in Developing Countries: Evidence from Nigeria

Abstract

This study investigates the nexus between fiscal policy and sustainable development in Nigeria over 34 years (1990-2023). The study employed ex post facto research design and measured sustainable development using Adjusted Net Savings (ANS), while fiscal policy was proxied by public debt, taxation, and government expenditure. Control of corruption was introduced as an interacting variable to moderate the relationship between the core fiscal policy instruments and sustainable development. Data was sourced from the World Development Indicators and the World Governance Indicators, 2024. The study analyzed the data using descriptive statistics, correlation analysis, and the Autoregressive Distributed Lag (ARDL) model. The ARDL results revealed that the relationship between fiscal policy instruments and sustainable development is inconclusive. However, the interaction between corruption control and fiscal policy instruments showed a significant short-run relationship between fiscal policy and sustainable development in Nigeria. The study concluded that government expenditure remains the main driver of sustainable development. It therefore recommended granting anti-corruption agencies greater structural, financial, and operational autonomy, while imposing stringent sanctions on corrupt public and private sector officials to encourage productive reinvestment and reduce virement in the public sector.