The Effect of Fiscal Policy in the Development of Nigeria Economy


The dominant factor underlying the federal government budgetary operation in 1999 were the favorable development in oil market, the depreciation of the naira exchange rate and subsequently rise indebt expenditure at fiscal operations of the federal government resulted in an over all deficit of 63,357 million.

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The implementation of the structural adjustment program was still on the main objectives of the years fiscal policies were the

  1. Promotion of export of manufactured goods.
  2. Generation of employment.
  3. Provision of more effective protection local industries.
  4. Enhancement of local sourced inputs and
  5. Reduction in tax burdens on individuals and cooperate bodies.

There was also upward review of the prices of petroleum product and proceed accruable estimated in N100 million was embark as special allocation to the mass transits program, also the proceeds from the unification of the 1998 policy of gasoline estimated at N80l million was set aside for projects in solid sector for the benefits of low income dwellers.

Oils was still the major form foreign exchange earner, accounting for 81.8% total federal collected revenue at N77,895,4 million. This was marginally lower than the figures to 1998 which was 92.2%.

Actual external debt servicing was a total of N30, 855.5 billion made up of N15,4948 billion as interest charges and N15,4948 billion as capital requirement.

The resulted in dept repayment equivalent of US$3,346,6 million as against the budgeted estimated at $2,114 million.

The distributions that arose in the fiscal year were attributed to the further depreciation of the naria from N87,62 to US$1 at December 1998 to N100 to US$ at December 1999. a 12.33% fall in value at the official foreign exchanges market rate. The parallel or black market show a total worse situation 1999 fiscal year also market the beginning of the first national rolling plan (1999-2001) his core objective was consolidated achievement of the structural adjustment program (SAP). The plane also was designed to address the pressing problems at exchange rate stability, storing inflationary pressures inadequate  gainful employment, sluggish performance at key productive sector, inter government fiscal imbalance and menaces at the anti-social behavior.

In the course of the 1999 fiscal year, the national directorate of employment created 436,226 new jobs under the four cardinal program-youth employment and vocational skills development, and special public works, this figures was higher than the 417,100 for 1998. this according to federal office of statistics amongst other dives factors resulted in the composite unemployment rate to destine to 3.2% from 4.5% in 1998.

The strategic industries popularly regarded to as federal government core industrial projects(cips) include the steel, plants, steel rolling mills, paper plants, fertilizer plants, petrol chemical plants etc the steel plants activities were compounded by common problem at lack of fund. High production cost necessitated by the devaluation of naria, and inadequate working capital. Their capacity utilization were still on the declining patterns.


The total federally revenue increased by 33.06% from the 1998 figures of N50,272.1 billion. The fiscal operation of the federal government resulted in a budget deficit of N23,357 million, a 52,9% increased over the figurers of 1998.thiswas attributed in debt servicing which increased substantially  due to the fall in the value of naria under provision of the budget. The external debt outstanding for the year amounted to N297, 894 billion when compared with 1998 N240, 393,6 billion. The total amount distributed under external debt repayment was N15, 859 billion compared to 1999 figures of N13, 163.3 billion.

  • Commencement of the 1999-20 national rolling plan.



Federal government (treasury component) N billion % of distribution
External loan (project tried) 22.9 15.9
Sub total 33.4 7.2
Oil investment (joint ventures) 20.6 14.3
Ecological and mineral producing area funds 3.5 2.4
Parastals 9.4 6.6
Sub total 33.5 23.2
State government 20.4 14.1
Local government 6.9 4.8
Sub total 27.3 18.9
Total public sector 94.2 65.3
Total private section 50.0 34.7
Total 144.2 100.0

Source: federal ministry of finance

  • Continued adoption of the harmonized commodity and coding system which provided for a life span of 7 years for customers and excise tariff that will be sustained by the government to encourage long-term corporate planning program started in 1988.
  • Tariff changes:

I with an aim of the protecting local industries from imparted substandard products, the import duties were adjusted follows:

  1. All forms of starch-from 35% to 20%
  2. R 20 battery from 70%-20%
  3. Fluorescent tubes, Gils bulbs-increased to 200%
  4. Glass shells – 40% to 200%
  5. Automotives filter – 105% to 25%
  6. Toothbrush – 35% to 70%
  7. Hinges – 30% to 50%
  8. Stables – 30% to 80%
  9. Wheel barrows – 1555 to 50%, 65%, 70%, over four consecutive years.
  10. P v c granules – from 25% to 35%
  11. Luk and pigment – from 20% t 30%
  12. Jewelry – 100% to 200%
  13. Bicycle farms – 30 to 50%
  14. Cold rolled tubes – 20% to 40%.
  15. Motor cycle and bicycle chain – 20% to 30%
    • Import duty reduction
  16. Super from 50% to 40%
  17. Paper making machinery – 30% to 10%
  18. Carbonizing base paper – 20% to 15%
  19. Tissue paper in jumbo rolls –20% to 10%
  20. Pulp – 20% to 10%
  21. Super paste for ships- 10% to 5%
    • Import duty removal

Live animals – from 30% to nylon sheep, goat and cattle.


AIM: To further reduce the tax on individual and corporate bodies, provide more

Incentives for productive activities, improve the collection machinery and sanctions tax evasion or made practices.

  1. Reduction in minimum tax from 10% to 0.5% of total income. Any individual who earns less than N3000 per annum is exempted from tax.
  2. Increase in personal allowance of individual taxpayers from N100 plus 12.5% of earned income to N2000 plus 15% earned income.
  3. Capital allowance: tax restriction of allowance to 75% of total projects in the case of companies engaged in manufacturing was repealed. Also an investment allowance of 105 on qualifying expenditure incurred on new production.
  4. Where a company fail to remit or account prompt for withholding tax deductions, an interest charge equivalent to the current bank rate will be charged on the amount due to the revenue authority by the FBIR


Products Old price New price % placed
LPG[cooking gas] 40k 80k 100k
AGO [diesel] 45/60 (60K) 60K      –
D P K 15k 40k 166.67%
Fuel oil 30k 40k 33.33%

Source: Nigeria petroleum corporation [NNPC]



1999(00) N’ billion

Total federal collected revenue                     66, 895.4

Less: independent revenue                                  48.9


Federation account

  1. a) Goss stabilization fund 66,846.5
  2. b) Total statutory allocation 48,000.0

Federal retained revenue                     37,792.1

  1. a) Share of the federation account 24,000.0
  2. b) Draw down of stabilization fund 12,853.1
  3. C) NEPRR –

TOTAL EXPENDITURE                               61,149.1

  1. a) Net recurrent expenditure (2) 12,397.3
  2. b) Debt services 39,545.1
  3. i) Domestic dept (8,689.3)
  4. ii) External dept (30,855.8)
  5. c) Net capital expenditure (3) 9,206.7


Current recurrent (i) deficit                             +1572.5

Over all deficit                                                – 237.0


External loan (3)                           1,5638

Internal loan of which                    27,042.0

(i) Banking system                        23,667.1

(a) Central bank                            (18,1772.8)

(b) Commercial bank                        (5,246.7)

(c) Merchant bank                               257.6

(ii) Non banking public                      3,364.9

Other funding                                  5,448.8

Source: CBN

  1. Provision: less interest changes and capital repayment respectively: 3 draw down on external loans: 4 include trust fund used as a balancing item, minus(-) denotes increase: plus(+) denotes decreases.

Sources: federal ministry of finance and economic development and central bank of Nigeria.





N billion % of total

OK revenue                                                     54,7113.2       81.8

Petroleum profit tax                                          26,909.0         40.2

Rent, royalties and NNPC, earning                       27,804.2         41.6

Non- oil revenue                                                   –                  –

Company income tax                                          3408,75.1

Customs and excise duties                                  3724,613.0

(NERE) non-oil                                                           –

Federal government                                            48.9               0.1

Total federally collected revenue                    66,895.4          100.00

Less: statutory allocation states

Local government and others                                     23,089.9

Transfer government retired revenue                          37,792.1

Source: (1) official gazette of the federal republic of Nigeria.

  • Federal ministry of finance and economic development.

The economy experienced further decline in the exchange of the naria to a value of N100 to $1 at December 1999, when compared with the 1998 figures, it amounted to a decline of 14.7% at the foreign exchange market. This further compounded the problem of import dependent industries, rationalization of staff, low level of productivity or outright closure and increase in the price of their products were the possible outcomes of the increased cost of production the massive devaluation of the naria further increased the naria value of external debts which increased by 23.9% for the reviewed period. It was also a 51% and 59% increase in the recurrent and capital expenditure figures respectively for 1998.

The totally federal collected revenue increased by 33.06% over the 1999 figures of N50.272 and with a deficit increased of 52.2% was recorded over the 1998 figures these increases were due to the increase yield of naria from oil export and increased government expenditure pattern respectively.

The fiscal policy objectives for 1999 were implemented under the protection of local industries, favorable tariff structure local industries, and favorable change in the certain industries and favorable change in the income taxes of individual and corporate bodies. (4.63) 50). They were aimed at improving personal allowances and capital relives respectively. However, there was an increase in petroleum products as a means of

  • Generating higher revenue for the government from non-oil sources.
  • Reduce smuggling the devaluation of the Nigeria, make Nigerian products cheaper when compared with foreign currencies and similar product across the boarders so it makes smuggling a curative venture.

Fiscal polices in Nigeria appear to effect all individual groups and organization directly in their own specific ways, this lays foundation to proper planning for those engaged in economic activities that are effected by these fiscal policies. Nigeria fiscal policies from all indication appear to posses the critical components at tariff structures expenditure patterns, legislation required for the impact essential for economic growth. But situation due arise when a progressive fiscal policy designs are rendered ineffective as a result of either in consistency implementation or poor implementation as whole.

Inconsistencies in this context refers to changes[spontaneous or otherwise] in the component of physical policy resulting in uncertainty. Inconsistency can be in form of out right discharging discarding of policy or modification or its discarding resulting in.

  1. loss of confidence in government matters or program.
  2. Difficulty in forecasting by business managers
  3. Apprehension by foreign investors.

These inconsistencies can be form of

  • Import duty reviews.
  • Excise duty reviews.
  • Changes in tax legislation like company or personal income tax rate or allowance and amongst several others.

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