Author: Robert C. Asogwa
Volume: 61 Issue No:2 Year:2019

Abstract: International evidence suggests that an important instrument available to government for bringing about inclusive growth is fiscal policy, an instrument which is rarely applied in many countries. Growing concern about the rising inequality in Nigeria and other developing economies is prompting new discussions on the use of fiscal policy and instruments to foster inclusive growth. The key objective of this paper is therefore to assess whether or not, recent fiscal policy trends in Nigeria affect inclusive growth (measured as benefits and access across different quintiles). First, we conduct a decomposition of public expenditure in Nigeria so as to compare the allocation to inequality-reducing sectors (education, health, social transfers/services) with other sectors over a period of time. Second, we estimate and compare the benefit incidence of the expenditure on education for all the income quintiles. Third, we measure the incidence of the different tax revenue components in Nigeria to ascertain whether they are progressive or regressive and their redistributive impact. The findings show that the current structures of public expenditure and taxes are not progressive enough and have limited powers to reduce inequality and enhance inclusive growth.

JEL classification: E62, H22