The Nexus Between Fiscal Policy and Income Inequality in Nigeria

This study examines the relationship that exists between fiscal policy and income inequality in Nigeria, spanning from 1990 to 2024, focusing on how government expenditure, taxation, GDP, inflation, and external debt affect the poverty rate. The study adopted pre-estimation, estimation and post-estimation techniques. Going by the results, it can be deduced that the regression results show that government expenditure and health investment play a significant role in poverty reduction, while taxation and external debt exhibit delayed and mixed effects. The ARDL and bounds test confirm that there is both a short-run and long-run relationship among the variables, emphasising that fiscal policy, particularly, should be targeted at social spending, which can significantly reduce the poverty rate. However, issues such as inflation, debt sustainability, and inefficient and effectiveness tax systems in Nigeria continue to undermine equity goals. The study concludes that policy makers should aim at improving public expenditure in an efficient and effective manner, enhancing progressive taxation, and reinforcing stakeholders’ capacity to ensure more inclusive, resilient and sustainable economic development.