Fiscal Policy and Economic Development in Sub Saharan Africa; Emphasis on Poverty in Ghana and Nigeria

This work examines the effect of fiscal policy on the economic development of Sub Saharan Africa with emphasis on poverty reduction in Ghana and Nigeria. The research covers the period of 1986-2017 for both countries. The secondary data needed for the research were collected and the analysis was conducted using e-views 10. The preliminary analysis on the data showed that the variables were stationary at first difference which confirmed the absence of unit root in the variables. The Johansen Cointegration test suggested that a long run relationship exist between fiscal policy and poverty reduction in both Ghana and Nigeria. The Vector Error Correction Mechanism confirmed that the relationship between fiscal policy and poverty reduction in Nigeria in short run form. But, the short run relationship between fiscal policy and poverty reduction in Nigeria is not statistically significant at 5% level of significance with F. Statistic value of 2.186 and Probability of 0.088. The result revealed that a unit change in tax revenue results to a 0.01046 unit reduction in poverty in Nigeria in the short run. Meanwhile, the result for Ghana reveled that a long run relationship existing between fiscal policy and poverty reduction is not statistically significant at 5% significance level with F.Stat. (1.477) and F.Stat.(Prob.P) 0.224. The results have revealed that Sub Saharan African economies have not significantly done enough in their lip service fight against poverty in the region. There is urgent need to tackle this menace of poverty by settle out programs that have direct effect on the people. An increase recurrent expenditure through income (salaries and wages) would benefit the poor the more. Increased funding to the Agricultural sector would help in reducing the poverty rate, as majority of the poor people in Sub Sahara Africa are predominantly farmers, as recurrent expenditure has a positive significant effect on poverty at 10% level of significance in the short run in Nigeria. There is need for a restructured revenue base in Nigeria and Ghana to finance fiscal policy expansion rather than embarking on borrowing which increases the burden on the poor. Government should as well distribute its social welfare program in a way that it would directly benefit the poor.