1.1 BACKGROUND OF THE STUDY
The economy of any country, irrespective of its structure
is regulated by certain policies developed by the government. Some of
these include economic policies, social policies, monetary policies etc.
however of all these policies economic policies are most fundamental.
The economic factors are cynical because they serve as a foundation for
the success of the other policies of government. The constituent element
of these economic policies need to be manipulated simultaneously to
achieve the desired results. The techniques of manipulating the economic
factors play an important role two. One of the essential arms of
economic policies – the fiscal policy, serve as a means of planning,
organizing, controlling and coordinating the tempo of activities in the
economy. Fiscal policy in itself can be said to be made up of specific
course of action involving the formulation of tax structure and
expenditure patterns. The direction of these expenditures and taxes are
specific in nature for results or changes. Before the world war, fiscal
policy as a key to economic restructuring and development has been in
existence. Many economists had propounded theories as a means to
economic prosperity from the destruction of the world war, but in the
early 20the century, Lord John Keynes put forward on articulated and
constructive solution to solving economic problem. Lord Keynes in his
book explain that the revamping of an economy could be achieved through
the redirection of government expenditures from war machines to soft
loans to increase investment, generate employment and consequently
increase aggregate demand as a means of getting hold on the
hyperinflation that existed after the Second World War.
In Nigeria, the earliest known forms of fiscal policies
were used. It was established as far back as 19th century by the British
Administration. Then the political system became complex due to the
existence of the indigenous government under Emirs, Obas, Obongs, Obis
etc. along with the colonial masters. In effect, payment for the
administration of the country were made to the British government.
The government policy used by the colonial masters on
revenue for development was adopted from Dr. Earl Grey report (1852) in
which he advocated economic development amongst civilized people.
Through self determination under the British supervision. Because of the
existence of local authorities which led to indirect rule policy, the
policy suited Nigeria. The revenue generation method which was based on
duties paid on imported goods was pursued because it avoided disruption
of the indigenous social and economic system and its incidence did not
directly affect the average Nigerian. Besides, revenue from duties the
British government support however, began to dwindle due to increase
public criticism in Britain against spreading of Brutish influence in
West Africa. 1870, the government supplement stopped and was reduced
from #5,000.00 to #2,000.00 to #1,000.00 in 1862, 1863 and 1865
respectively. The expenditure was solely directed towards improving the
comfort of the British officers and the maintenance of law and orders.
These and then. The revenue and expenditure volume also increase
considerably well into the 20th century. Considering this modern time,
fiscal policy as a means of economic development are not developed in
isolation. They are formulated and implemented simultaneously with
monetary policies, foreign policies by the government with the aim of
having a synchronized approach in tackling economic problems. The
generally accepted fiscal policy measure incorporates welfare economics
as a means of reducing adverse effects that may arise thus reducing the
standard of living of the citizens of the country.
From the foregoing, this research is aimed at identifying
the role of fiscal policies in the development of Nigerian economy.
1.2 STATEMENT OF THE PROBLEMS.
Fiscal policies can be valuable tool for economic growth
and development if accurately and timely implemented. Therefore by the
end of this project the following questions will be answered.
- Do Nigeria fiscal policies posses the required components and impact needed to fiscal economic growth?
- Are the fiscal policies consistent or not?
- Are they properly implemented?
- Can any improvement be made
1.3 OBJECTIVES OF THE STUDY
- To examine the fiscal policies formulation in Nigeria from 1998 – 2000
- To identify the role they play in the development of Nigerian economy
- To determine if these roles have been consistent with stated objectives of the government.
- To determine the extent of implementation of formulated fiscal policies.
- To make recommendation where appropriate.
1.4 MAJOR RESEARCH HYPOTHESIS.
In order to interpret the result of this research study, the following hypothesis are formulated
1. Ho: Fiscal policies have not helped in the development of Nigerian economy
H1: Fiscal policies have helped in the development of Nigerian economy.
2. Ho: For some years now, fiscal policies have not been properly implemented.
H1: For some years now, fiscal policies have been properly implemented.
1.5 SCOPE AND LIMITATION OF THE STUDY
The scope of this research work has been limited to
fiscal policy formulations and implementation in Nigeria between 1998
and 2000. it also includes the relationship between fiscal policies and
other government economic policies how it is used to fight inflation,
unemployment, encourage, investment/production of goods and services and
generally encourage private participation in economy building.
This study further highlights the relevance of fiscal
policies in the Nigeria economy. Its emphasis, encompasses the component
of fiscal policies. Its relationship with other disciplines, how it is
used in the economy. It does not however include comparison with other
countries since economic structure and system differ and therefore would
amount to unfair comparison. Constraints faced during this research
- Limitation of cost and time
- Restricted access to some classified documents
- Fiscal disability and scarcity of related items.
1.6 SIGNIFICANCE OF THE STUDY
As a result of unequal importance of a stable and
unstable economy to both the public and private sectors, this research
work will be of benefits to
- Government for better planning of all policies related to their
responsibilities to the economy in particular and the country as a
- The professional – who analyze the economic system and whom this
study will give an insight into further research and application in
their academic fields.
- Students – as part of their academic pursuit.
- The entrepreneurs and Business men who also need to understand the
implications and effects of certain fiscal policies that can have on
their fortunes directly or indirectly.
1.7 DEFINITION OF TERMS.
STATUTORY ALLOCATION: A fund established by the federal government
for pooling of extra – budgetary revenue of unexpected income especially
from oil exports. It also provided a sources of fund for emergency
TAX: Compulsory payments by individuals corporate organization and
partnership into the pursue of government for running of its activities.
TAX AVOIDANCE: A legitimate way of not paying tax by engaging in non-taxable activities.
TAX EVATION: An illegal way of not paying tax, one is liable to pay to the government. It is a criminal offence.
PER CAPITAL INCOME: A method of assessing the standard of living in
any country. It involves determining potential income per person in an
MULTINATIONALS: Large firms in Nigerian that are one of the numerous subsidiaries of the parent companies aboard.
FOREIGN POLICY: Articulated course of action that defines Nigeria’s
relationship with other countries and its stand and attitude towards
certain international issues.
BUDGET: An economic tool used by government to estimate its expected
revenue and project expenditure over a period of time usually a year.
MARGINAL PROPENSITY OF INVESTMENT: That degree of increase in investment due to increase in income.
INFLATION RATE: The rate or speed at which the general price level are increasing.
MARGINAL PROPENSITY TO CONSUME: That degree of increase in consumption level as a result of increase income.
DEBT CONVERSION PROGRAMME: A system initiated by the federal
government through the central bank in which the country’s external
debts are sold through auction to interested parties.
NATIONAL ROLLING PLAN: A kind of fiscal policy adopted by government
especially during 198 – 2000 year which aimed at achieving real economic
growth and macroeconomic stability in order to fight the problems of
unemployment and poverty in the society.