FISCAL POLICY TOOLS AND SUSTAINABLE DEVELOPMENT IN NIGERIA: EVIDENCE FROM ADJUSTED NET SAVINGS

Abstract

This study examines the effects of fiscal policy tools on sustainable development in Nigeria over the period 1981–2023. Anchored on the modified Keynesian framework, the study estimates the long-run and short-run effects of annual time-series data based on Autoregressive Distributed Lag (ARDL) approach. The findings indicate that government capital expenditureim proves Adjusted Net Savings (ANS), whereas recurrent expenditure undermines long-term sustainability. Non-oil tax revenue exerts significant negative effect, while, oil revenue has positive but insignificant impact on ANS. Similarly, fiscal deficit had negative and insignificant effect on ANS, reflecting limited sustainability of deficit-financed expenditure. The results also show that Nigeria’s macro-economy is subject to recurrent structural breaks driven by oil-price cycles, discrete changes in the policy regime, and external financing conditions. Accounting for them is essential both for valid inferences and for the design of policies that can survive oil-price or political shocks. By adopting ANS as an indicator of sustainable development, the study extends the fiscal policy literature beyond conventional growth measures and provides new evidence on the heterogeneous effects of fiscal instruments in Nigeria. The findings underscore the need to reorient fiscal policy toward productive public investment, and prioritize investment-driven fiscal deficits to achieve sustainable development.