Fiscal Policy and Term Structure of Interest Rate in Nigeria
Fiscal Policy and Term Structure of Interest Rate in Nigeria

Summary/Abstract: The study examines the effects of fiscal policy on term structure of interest rate in Nigeriabetween 1981 and 2014. The paper built on the fact that continuous increase in fiscal deficit in Nigeriahas not translated into equal change in term structure of interest rate as proposed by the economictheory. Using secondary annual time series data which are obtained from Central Bank statisticalbulletin, 2014, the paper employed appropriate econometric techniques such unit-root test, JohansenCo-integration technique, Error Correction Mechanism and Fully Modified Ordinary Least Squares.The paper shows that fiscal deficit has a positive and significant effect on term structure of interest ratein Nigeria and concludes that consumers are not forward-looking in Nigeria as proposed by RicardianEquivalence Hypothesis theory. Consumers in Nigeria increase their consumptions has governmentemployed expansionary fiscal policy which may reduce the savings and investment. Consequently,reduces growth. Thus, the implication is that fiscal deficit could

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