FISCAL POLICY INSTRUMENTS, EXCHANGE RATE AND ECONOMIC PERFORMANCE IN NIGERIA (2000-2024)

This study examines the impact of fiscal policy instruments and exchange rate dynamics on Nigeria’s economic performance using time series data for the period 2000 to 2024. Real Gross Domestic Product (RGDP) is used as a proxy for economic performance, with fiscal policy represented by government expenditure(capital expenditure) and government revenue (taxation), and exchange rate measured using official naira–US dollar figures. Data were sourced from the Central Bank of Nigeria (CBN), National Bureau of Statistics (NBS), and the World Bank. Methodologically, the study employed Autoregressive Distributed Lag (ARDL) model to capture short- and long-run dynamics, the Nonlinear ARDL (NARDL) to account for asymmetries, and Granger causality tests to determine causal links. To ensure robustness of results, the study accounts for descriptive statistics, correlation analysis, and unit root testing. The results show that all variables are integrated of order one, I(1). Government expenditure has a positive and significant impact on RGDP, while government revenue yields mixed effects, reflecting trade-offs in taxation. The exchange rate negatively affects RGDP in the short run but positively in the long run, suggesting that depreciation initially constrains activity but eventually supports competitiveness. NARDL results confirm significant asymmetric effects, while Granger causality indicates that government expenditure and revenue influence RGDP, whereas the exchange rate does not. The study recommends prioritizing growth-oriented public spending, modernizing taxation, ensuring credible exchange rate management, and aligning fiscal incentives with export diversification to strengthen long-term growth.