CROWDING-OUT EFFECTS OF FISCAL POLICY ON PRIVATE SECTOR INVESTMENT IN NIGERIA: 8 AN EMPIRICAL INVESTIGATION (2000-2012)

GUSHIBET S. TITUS, TSENBA S. WUMMEN, CHINONSO I. KAIRO

Abstract


The paper empirically examines fiscal policy and private sector investment with evidence from Nigeria's data. The objective of this paper is to determine the reality of crowding out effect and the impact of fiscal policy on private sector investment in Nigeria using time series data for the
period 2000-2012.The choice of the period coincided with stable onstitutional democracy in Nigeria which commenced from 29 May, 1999. Unit root and stability tests were conducted using the robust regression method to take care of stationarity or non-stationarity of data sets, as well
as multiple regression analysis to confirm the impact of fiscal policy on the investment of private sector. Thus, the methodology of the study employs the use of multiple regression equation of a simple macro-econometric model to estimate the parameters of the fiscal policy equation using
Ordinary Least Squares (OLS) analytical technique. Data collectedfrom Central Bank of Nigeria, the National Bureau of Statistics (NBS) and Federal Inland Revenue Service(FIRS) were used. The study shows that fiscal policy has impactednegatively on private sector investment in Nigeria.The study suggests that high level of government expenditure in
unproductive sectors is unnecessary and should be reduced, while more public expenditures in critical sectors should be encouraged. Thus, the paper recommends that government expenditures should be tailored towards the provision of infrastructures, power, and regulatory support that could provide a level playing field for the private sector to thrive in Nigeria. This will facilitate capital accumulation and investment that will accelerate the growth of income, employment and output rather than limit the expansion of private investments in the country.

Keywords: Fiscal policy, Tax, Revenue, Government expenditure, Investment, Crowding out

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International Journal of Management Science Research ISSN ISSN 2536 – 605X(Print)

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