Journal of Harmonized Research in Management

FPREIGN AID AND FISCAL POLICY NEXUS IN NIGERIA: DOES DEREGULATION MATTERS?

Abstract

Author(s): Mukolu, M.O and Aladesanmi, K.A

The study examined the influence of deregulation on the relationship between foreign aid and fiscal policy in Nigeria. The equation which described foreign aid as function of important fiscal varia bl es and other macroeconomic variables is derived from the famous two-gap model. Chow test is used to examine if there is any structural changes since the adoption of deregulation that has significantly affected the relationship between foreign aid and fiscal policy. The result shows that deregulation has positively and significantly affected the impact of fiscal policy in Nigeria on foreign aid accessibility. But the effect has been short-lived recently owing to the recent drastic fall in foreign aid available to Nigeria despite the sustained increase in both government revenue and expenditure. It is recommended that assessment of other shocks that can affect the fiscal policy in Nigeria should be conducted with aview to getting the reason why deregulation fails to maintain positive relationship that exists between fiscal policy and foreign aid in Nigeria