Fiscal Policy and Macroeconomic Stability in Nigeria

Abstract The study examined Nigeria's fiscal policy and macroeconomic stability between 1981 and 2021 using the Ordinary Least Squares method. A stationarity test was conducted using the Augmented Dicky Fuller unit root test, which found that total government expenditures, unemployment rates, real gross domestic product, exchange rates, per capital income, public external debt and balance of payments are integrated of order I(1), whereas inflation is integrated of order zero I(0). Using the Johansen co-integration test, the study determined that the variables are co-integrated over the long run. Based on the results of the study, total government expenditure (TGE) has no significant relationship with inflation (INF) and gross domestic product (GDP), but has a positive significant effect on unemployment (UEMP). This study concludes that the government should also restructure public expenditures in order to spur growth, create an environment conducive to private sector development, and ensure that the inflation rate is reduced to a single digit so that the Naira appreciates.