Fiscal Policy Instruments and Industrial Sector Performance in Nigeria, 2015–2025

Abstract

This study examines the relationship between four fiscal policy instruments, government expenditure, tax revenue, public debt, and fiscal deficit, and the performance of Nigeria's industrial sector between 2015 and 2025, a period spanning a recession, a pandemic shock, and a major fuel-subsidy removal. Using an ex-post facto design and eleven annual observations drawn from Central Bank of Nigeria, Debt Management Office, National Bureau of Statistics, and Federal Ministry of Finance publications, the study applies descriptive statistics, Pearson correlation, and bivariate regression to test four hypotheses linking each instrument to industrial sector contribution to gross domestic product. All four fiscal instruments show a positive and statistically significant bivariate association with industrial performance, including public debt and fiscal deficit, contrary to the negative relationship often assumed in the literature. However, severe multicollinearity among the four predictors, exceeding 0.96 in three of six pairwise correlations, together with the trending nature of all series over the study period, means these relationships should be read as evidence of a shared upward trajectory rather than as confirmation of the specific causal channels hypothesised. The study recommends that government prioritise the productive quality of expenditure and debt-financed investment over their volume, strengthen non-oil revenue mobilisation, and commission time-series research using cointegration methods capable of separating genuine long-run relationships from common trend before firmer policy conclusions are drawn.