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Although, the empirical findings from the above reported symmetric and asymmetric short and long run results shows that, fiscal policy when measured via government capital expenditure (GCE) has the tendency of responding asymmetrically to oil price shocks particularly in the short run as suggested by the Wald asymmetry test results in Table 4.4(c).

However, the overwhelm non-significance evidence of the Wald asymmetric test results has not only fails to reject the null hypothesis of no asymmetry impact of oil price shock on total government expenditure and recurrent expenditure component of Nigerian fiscal policy, the evidence is also consistent for tax revenue (PTR), borrowing and transfer payment.

Consequently, the statistical significance of the ARDL bound cointegration test results particularly when the fiscal policy in the case of Nigerian economy is expressed via government total and capital expenditures suggest that, the asymmetric long run impact of oil price shocks on fiscal policy tend to matter more for government fiscal expenditure as against tax revenue which is measure using petroleum tax and royalties (PTR) in the case of this study.

On the other hand however, the empirical findings based on the estimated coefficients show that, regardless of whether the estimated model is symmetry or asymmetry model, the likelihood of the Nigerian fiscal policy responding positively to oil price shocks is rather a short run phenomenon, except for the petroleum tax and royalties whose long run symmetric

coefficient shown to responding significantly, but weakly to oil price shocks. More so however, is the fact that the magnitude of the response of fiscal policy to oil price shocks is more significantly pronounced when the shock to oil price is positive. This by implication suggests that the likelihood of asymmetry in the response of fiscal policy to oil price shocks cannot be entirely neglected even though the asymmetry Wald test results tend to suggests otherwise in most cases. For instance, the estimated coefficients show that shocks to oil price matters for short run capital expenditure, but it is the positive oil price shocks that exhibits the tendency of enhancing capital expenditure positively at least in the long run.

Noticeable in the analysis of the different dimension of fiscal policy analyzed, that is, total government expenditure, capital expenditure, recurrent expenditure, tax revenue, borrowing and transfer payment is the fact that; the equilibrium adjustment process that correct for disequilibrium in the short run only matter in the case of total government expenditure, capital expenditure and the borrowing profiles, where the error correction coefficients are found to be consistent both theoretically and empirically. The significant of the negative error term coefficients suggest that, on average; fiscal policy measures via total government expenditure, capital expenditure and government borrowinghas the tendency of adjusting to equilibrium in the short run. However, adjustment to the long run equilibrium was faster when the shock is assumed to be identical (symmetry)except for the case of government borrowing where there seem no significant difference in the extent to which adjustment to equilibrium vary for symmetric and asymmetric models.

On the significance of the additional oil and non-oil macroeconomic variables included in the model to further explain the short and long dynamics of fiscal policy in Nigeria. The study finds that the short run significant and positive impact of oil revenue on fiscal policy such as total government expenditure and capital expenditure only became effective after a quarter of period had passed. This by implication is an indication that oil

price and/or proceeds from the sale of crude oil may not necessary matter for fiscal policy in Nigeria in the long run. However, the significant and positive impact of oil revenue on capital expenditure is only a short run phenomenon. In the long run, it is non-oil revenue that is likely to stimulate capital expenditure positively, and reverse is the case for oil revenue in the long run. Somehow interesting however, is the indication of positive impact of non-oil revenue on fiscal policy both in the short and long run situations.

In what appears to be in consistent with the apriori expectation of the study, a 1%

appreciation in the Nigerian exchange rate tends to increase the country fiscal policy as measures total government expenditures by 0.3% and 0.5% in the short and long run situations respectively. Consequently, the likelihood of rising price level (inflation rate) leading to increasing fiscal spending appears to be significantly viable in the long run, where a 1% increase in the price level tend to accounts for 0.42% of changes in fiscal policy. This again, reaffirms the oil-based structure of the Nigeria which is expected as reflected to fluctuate more in line to movement in the relative price (exchange rate) both in the short and long run situations as against the domestic price (inflation rate).As expected of the driver of government public and private borrowing, the differential interest rate (dfr) rather than shock to oil prices is consistently reveal as significant for explaining government borrowing in the short and long run dynamics and across the symmetric and asymmetric models.

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS