Finance and Fiscal Policy

The Nigerian economy has been plagued with several challenges over the years. Researchers
have identified some of these challenges as: gross mismanagement/misappropriation of public
funds, corruption and ineffective economic policies, lack of integration of macroeconomic plans
and the absence of harmonization and coordination of fiscal policies as well as inappropriate and
ineffective policies. Imprudent public spending and weak sectorial linkages and other
socioeconomic maladies constitute the bane of rapid economic growth and development. This is
inspite of astronomical increases in various fiscal policies over the years. It is on this background
that this study would investigate the impact of fiscal policy on the economic growth of Nigeria.
Balance of Payments, Debt, Financial Crises, and Stabilization Policies
Without doubt, external borrowing can stimulate growth but the extent would be determined by
the usage of the acquired resources. Actually, considering the low level of capital formation in
Nigeria, caused by the low level of income and the generally high incidence of poverty, the
country has few prospects to source sufficient funds for development internally. It is generally
expected that developing countries, facing scarcity of capital, will acquire external debt to
supplement domestic saving. Undoubtedly, the inability of Nigeria to meet their social needs and
escape from debt results from the fact that the borrowed funds have not been used productively.
Instead of financing domestic investment in the key sectors, a substantial fraction of the
borrowed funds was captured by African political elites and channelled abroad in the form of
capital flight.