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Fiscal Policy, Private Consumption and Employment in Nigeria: An Empirical Investigation

The study examined the influence of fiscal policy on private consumption and employment in Nigeria for the period of 1975 to 2023 using annual time series data sourced from the statistical bulletins (various editions) of central Bank of Nigeria, National Bureau of Statistics and Federal Inland Revenue. The data were tested for stationarity using Augmented-Dickey Fuller (ADF) and Phillips-Perron (PP) unit root test. The test results showed that all the variables used in the study are stationary at their first difference [i.e.   1(1)]. The data were also subjected to cointegration test to ascertain whether using the variables together would ensure reliable results. The test results confirm the presence of a long-run association among the variables which satisfy the condition for our fitting a parsimonious Error Correction Model (ECM) to the data. The empirical results of the models indicated a positive and significant relationship between aggregate government expenditure and private consumption spending. We also found a positive and but insignificant relationship between government expenditure and employment in Nigeria. Furthermore, the study revealed that tax revenue exhibited a negative and an insignificant impact on private consumption spending, tax revenue also exerted positive but insignificant impact on the rate of employment in Nigeria. Further results of the study revealed that wage rate has negative and significant impact on aggregate employment in Nigeria. Lastly, broad money supply has a positive and an insignificant influence on aggregate employment in Nigeria. This suggests that fiscal policy tools of government expenditure and taxation do not have appreciable impact on the rate of employment and private consumption in Nigeria. The study recommends that government should increase and sustain its spending decision on basic infrastructure such as electricity, transport /communication facilities, education and health. Also tax revenue should be efficiently mobilized and channeled to capital projects capable of generating employment opportunities for the people, especially the youths. There is also the need for government to spend more tax revenue on social transfers, rural development, grants and other social services capable of raising the consumption level of households in Nigeria.