IMPACT OF FISCAL POLICY AND MONETARY POLICY ON THE ECONOMIC GROWTH OF NIGERIA (1980 – 2016)

ABSTRACT: This research work focused on the impact of fiscal and monetary policy on Nigeria‟s economicgrowth between 1980 and 2016. In the study, variables such as government expenditure and taxation revenuewere used to proxy fiscal policy while the broad money supply was employed as a proxy for monetary policy.The other variable employed as controlled variable is interest rate. The unit root test confirmed that all thevariables were not stationary at levels but were stationary at first difference. Also, the Johansen cointegrationtest confirmed that a long run relationship exists between fiscal policy, monetary policy and economic growth inNigeria. The empirical results reported using the ordinary least squares technique suggested that fiscal policyhas positive and significant impact on economic growth, and monetary policy has positive impact on economicgrowth as well. We, therefore, conclude that both fiscal and monetary policies have positive and significantimpact on Nigeria‟s economic growth between 1980 and 2016. To this end, we recommend that the FederalGovernment of Nigeria should focus on using the fiscal policy instruments to stimulate the economy in thedesired direction in order to sustain economic growth process. We also call on the Central Bank of Nigeria toconsistently embark on appropriate and effective monetary policy to boost the economy. Furthermore, sinceinterest rate is observed to negatively impact economic growth, efforts should be made as lowering the cost ofborrowing in the commercial banks and other financial institutions in order to boost investment and increaseeconomic growth in the country.