FISCAL POLICY VARIABLES AND MANUFACTURING SECTOR PERFORMANCE IN NIGERIA

Governments across the world developed policies, including fiscal policies aimed at attracting investments to the manufacturing sector, as fiscal policies are major determinants of manufacturing performance. Thus, this study investigated the impact of fiscal policy variables on manufacturing sector performance in Nigeria from 1986 to 2023 using the Autoregressive Distributed Lag Regression technique. Results revealed that government tax revenue is positively and significantly related to manufacturing sector performance in the short-run. Similarly, over the long term, the projected impact of government tax revenue on manufacturing sector performance is positive but statistically insignificant. On the other hand, the findings indicated that government recurrent expenditure affected manufacturing sector performance negatively in the short-run. However, government recurrent expenditure is positively and insignificantly related to manufacturing sector performance in the long run. Furthermore, the estimated impact of one period lagged government capital expenditure on manufacturing sector performance in the short-run is positive and significant. While, government capital expenditure is insignificant and negatively related to manufacturing sector performance in the long run. While, the coefficient of external debts at level is positive and significant in the short run. However, external debt is negative and insignificantly related to manufacturing sector performance in the long-run. This study therefore recommended that the Federal Ministry of Finance in collaboration with the Federal Inland Revenue Service should enhance efficiency in tax administration and widen the tax net to include the informal sector and digital economy. Further, the Budget Office of the Federation, and National Assembly Appropriations Committee should reallocate recurrent expenditure towards sectors that directly support the manufacturing sector (e.g., energy subsidies, transportation, R&D support). Also, the Federal Ministry of Works and Housing, and Infrastructure Concession Regulatory Commission should improve the planning, execution, and monitoring of capital projects, ensuring they target manufacturing-enabling infrastructure. While, the Debt Management Office, Ministry of Finance, National Assembly should limit unproductive external borrowing by tying new external borrowing strictly to capital projects that directly enhance industrial productivity (e.g., industrial parks, power generation).