The Dynamics of Fiscal Policy Measures on Manufacturing Sector Growth: Evidence from Nigerian Economy

Abstract

This study investigates the dynamics of fiscal policy measures on manufacturing sector output growth: evidence from Nigeria economy for the period 1981 to 2021 using the estimation technique of the Autoregressive Distributed Lag (ARDL) model. The research utilized an ex-post facto design and collected time series data from Central bank of Nigeria and National Bureau of Statistics on manufacturing sector output growth rate, economic growth rate, company income tax, tariff and government expenditure on infrastructure. The findings indicated that a negative and significant relationship exist between company income tax, tariff and the manufacturing output growth rate while a positive and significant relationship exist between government expenditure on infrastructure and manufacturing output growth rate in the long run. A positive and significant relationship exists between manufacturing output growth rate and economic growth rate. The Toda-Yamamoto causality test showed a uni-directional relationship between company income tax, government expenditure on infrastructure and manufacturing output growth . Based on this finding, the study made the following recommendation: the Federal Inland Revenue Service may consider carefully evaluating the current company income tax structure. A reduction in company income tax rates or the implementation of incentives for businesses particularly the infant industries could stimulate manufacturing growth over the long term. The federal ministry of trade and industry should assess the impact of existing trade policies. A gradual reduction in tariff rates or the implementation of trade policies that encourage manufacturing activities may contribute to long-term growth. Government should prioritize infrastructure development projects as a means to support and sustain the manufacturing sector. Policymakers should continue to support policies that promote a robust and dynamic manufacturing industry since its growth subsequently affects the economy's overall growth positively.