Foreign Aid, Fiscal Policy and Economic Growth in Nigeria.

Abstract

This study examines the impact of foreign aid and fiscal policy on Economic growth in Nigeria from 1971 to 2022. Secondary data were sourced from Central Bank of Nigeria (CBN) statistical Bulletin and World Bank Development indicator. The study adopts the ARDL Co-integration and Error Correction Modeling (ECM) techniques for its analysis. The result shows that foreign aid and government Expenditure do not significantly influence growth in Nigeria. Meanwhile, it was established that public debt did not only impact GDP negatively, but played a significant role in financing expenditure and ultimately improved growth. The R² value (0.72) is consistently high in the model and the ECM showed quick response to the adjustments of the variables. Based on the findings, the study recommended that government should reduce international loan defaults to avoid huge debt accumulation and debt service; embrace more Public-Private Partnership (PPP) to procure government assets rather than sought foreign loans with or without concessions; and loans sought from official development assistance agencies meant for development projects be utilized for such purpose(s) rather than diverted to enhance economic growth.