IMPACTS OF FISCAL POLICY ON POVERTY REDUCTION IN NIGERIA

ABSTRACT This study investigates the impact of fiscal policy on poverty reduction in Nigeria over the period 1991–2023, employing the Autoregressive Distributed Lag (ARDL) approach. Using time-series data from the Central Bank of Nigeria, World Bank Development Indicators, and National Bureau of Statistics, the research examines the relationship between poverty rates and key fiscal variables—government expenditure, government revenue, real GDP per capita, unemployment, and inflation. Stationarity tests revealed mixed orders of integration, justifying the ARDL framework for both short-run and long-run dynamics. Empirical findings indicate that government expenditure has a statistically significant and positive effect on poverty rates, suggesting that increased public spending has not effectively reduced poverty, possibly due to poor targeting, inefficiency, and corruption. Other variables, including GDP per capita, unemployment, inflation, and government revenue, were statistically insignificant, though their signs provide insights into Nigeria’s economic structure—particularly the persistence of non-inclusive growth and structural unemployment. Diagnostic tests confirmed model robustness, with a high explanatory power (R² = 0.989) and no evidence of autocorrelation. The results underscore that fiscal policy effectiveness depends more on expenditure quality, targeting, and governance than on the magnitude of spending. The study concludes that without institutional reforms to enhance fiscal transparency, accountability, and pro-poor allocation, fiscal policy will remain limited in addressing poverty. It recommends reallocation of public funds to sectors with high poverty-reduction potential, strengthening fiscal governance, and aligning fiscal measures with inclusive economic growth strategies.