FISCAL POLICY AND ECONOMIC STABILITY: A COMPREHENSIVE EVALUATION OF FISCAL STABILIZATION MEASURES IN NIGERIA

The central aims of fiscal policy are to foster economic growth, stabilize prices, and achieve full employment. Fiscal policies encompass a variety of macroeconomic instruments, including government spending, budgetary allocations, taxation, and transfer payments, all utilized by the government to maintain economic stability. The main objective of the study is to investigate the relationship between fiscal policy and economic stability in Nigeria. The study employed various econometric techniques such as unit root test, cointegration test using bounds tests and ARDL model on secondary data set ranging from 1981 to 2023. The findings indicate that government expenditure on administration significantly reduces inflation in both the short and long run, likely due to improvements in governance efficiency and fiscal discipline. In contrast, transfer payments contribute to rising inflation over time, suggesting that increased liquidity from such expenditures fuels aggregate demand and price pressures. Other fiscal variables, including expenditures on economic services, community and social services, and tax revenue, do not exhibit statistically significant effects on inflation in either the short or long run. The researcher recommends that the government should prioritize increased and efficient administrative spending, as it has been shown to significantly reduce inflation in both the short and long run. Enhancing governance efficiency and fiscal discipline through well-managed administrative expenditures can help stabilize inflationary pressures and promote economic stability.