June 18, 2013

The Role Of Fiscal Policy In Promoting Growth

The paper examines fiscal policy as it influences growth through taxes
and service delivery. It also reviews Nigerias experience with fiscal policy
as well as challenges to its current system.

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Author:Menachem Katz

Publication Date: December, 2012

Document Size:31pages


Recent experience with fiscal policy

  • Prior to 2004 fiscal policy was pro-cyclicalsubjecting the economy to boom-bust cycles
  • During 2004-2008 , with oil price-based ruleand ECA, economy stabilized and inflation fell.
  • In 2009 and 2010 external shock and largespending expansion resulted in high budgetdeficits and depletion of ECA
  • Since 2012, fiscal policy has been tightened.




Related

 

Nigeria Economic Update (Issue 18)

Recent Data released by the Nigeria Bureau of Statistics reveals an increase in total public debt stock between 2015 and 2016. Foreign and domestic debt stock stood at $11.4 billion and N14.0 trillion respectively as at December 2016, from $10.7 billion and N10.5 trillionrecorded as at December 2015. Disaggregated data shows that foreign debt sources comprised Multilateral ($8.0 billion), Bilateral ($0.2 billion) and Exim bank of China ($3.2 billion); domestic sources included government bonds, treasury bills and bonds. The federal government and states accounted for 68.7% and 31.3% respectively of foreign debt stock; 78.9% and 21.1% respectively of domestic debt stock. This maybe particularly at the backdrop of government borrowings in 2016 to finance its expenditure (mostly recurrent).

Nigeria Economic Update (Issue 6)

Latest figures of FDI flows to Nigeria show a decline of 27 per cent from $4.7 billion in 2014 to $3.4 billion in 20152, representing its lowest value since 2005. This decline is largely attributed to the oil price slump, which has generally increased uncertainty in the economy, with adverse effects on investors confidence. The fall in FDI flows was witnessed in most resource based economies in Africa, as FDI flows to the continent fell by 31 percent in 2015. The forex controls in place in Nigeria has also exacerbated the uncertainty in economy, and created obstacles for both domestic and foreign investors. Thus a review of the forex restrictions could send positive signals to investors.