Ranking Methodology

In an attempt to realize the objective of this study, an estimation of a linear regression model was followed. The linear model for this study were formulated based on empirical studies of Alimi, Yinusa, Akintoye and Aworinde (2015) and Akpan and Atan (2015). The original model adopted is stated as:

Where denotes the vector of the six endogenous variables given by

= , is

vector of intercept term, is the matrix of auto-regressive coefficients of the order . = government revenue; = government expenditure;

= fiscal balance growth; = money supply to economic size; = lending rate; = total trade to GDP; = exchange rate and = per capita income growth.

Following Alimi, Yinusa, Akintoye and Aworinde (2015) and Akpan and Atan (2015), fiscal policy as not instrumental for macroeconomic performance in Nigeria amalgamating recurrent expenditure, capital expenditure and fiscal deficit in modified models were functionally estimated thus:

98 Transforming the models to log-linear format to normalize the divergence that may result from different numerical base of the variables, the following equations were estimated:

Model 1

Model 2

Model 3

Model 4

Model 5

Model 6

Where:

RGDP is real gross domestic product: This is the monetary value of goods and services produced in a country over a specified period of time. It is the widely accepted measurement of health of an economy. Rising GDP is an indication that an economy is doing well but declining GDP portrays recession in an economy. GDP as a macroeconomic variable was applied in the works of Adigwe, Anyanwu and Udeh (2016), Alimi, Yinusa, Akintoye and Aworinde (2015) and Akpan and Atan (2015), Ismal (2013), Tagkalakis (2013), Abubakar (2016), Josten (2003), Osuala and Ebieri (2014), Falade and

99 Falorunsho (2015), Babalola (2015) and Auteri and Constantini (2004) among others.

IND is industrial development: Industrial development in the context of this study was measured with index of industrial production. The index of industrial production is the total output generated by the industrial sector in a specified time period. It the index that captures all industrial activity in Nigeria economy. The use of industrial production index to surrogate an economy‘s industrial activity over time is supported by Aghion, Hemous and Kharoubi (2009), Andabai (2014), Bakare-Aremu and Osobase (2015), Osinowo (2015), Olasunkanmi (2013), Ioana-Laura (2015), Kumar (2014), Eze and Ogiji (2013) and Ezejiofor, Adigwe and Echekoba (2015).

MSP is money supply: Money supply is the total amount of money in circulation in an economy at a particular time period. Money supply encompasses coins, currency notes, fixed, savings and time deposit of individuals held in banks. The extent of liquidity different money instruments have on the economy at a specified period stipulates the money supply. Bakare (2011), Hoang (2014), Faramarzi, Avazalipour, Khaleghi and Hakimipour (2014) and Georgantopoulous and Tsamis (2014) recognize money supply as an important financial macroeconomic fundamental.

INFT is inflationary trend: Inflation is the unanticipated rise in the price of goods and services occasioned by high volume of money in circulation.

Inflation reduces the purchasing power of money. Nigeria has recorded a high level of inflation over the years. Inflation as a macroeconomic element was authenticated in the studies of Nwakoby, Okaro and Ananwude (2016), Nwakoby (2016), Umeora (2013), Dockery, Ezeabasili and Herbert (2012),

100 Oladipo and Akinbobola (2011), Tiwari and Tiwari (2014), Ozurumba (2012), Egbulonu and Wobilor (2016) and Rehman, Khan and Wahid (2016).

INTR is interest rate: Interest rate as used in this study is the rate at which deposit money banks lend to individuals for personal, commercial or productive economic activity in the country. Interest rate in Nigeria has been adjudged to be among the highest in the world which deter access to credit from the banking sector. Interest rate as factor affecting access to finance from the banking industry is confirmed in the works of Mukhtar and Zakaria (2008), Chen (2016), Bonga-Bonga (2012), Aisen and Hauner (2008), Bayat, Kayhan and Senturk (2012), Noula (2012), Asemoah (2016), Marsal, Kaszab and Horvath (2015), Chakraborty (2012) and Nkalu (2015).

EXR is exchange rate: Exchange rate is the price of one country‘s currency against another. It is the rate at which a country‘s currency is exchanged for another or currencies of other countries. The exchange rate of Nigerian Naira against other countries of the world especially the USA Dollar, British Euro and European Euros has greatly deteriorated over the years starting in 1986 when the Structural Adjustment Programme (SAP) was introduced in the Nigerian economy by the Ibrahim Badamasi Babangida administration.

Saysombath and Kyophilavong (2013), Kuncoro (2012), Karra (2011), Chatterjee and Mursagulov (20110, Parsley and Wei (2014), Monacelli and Perotti (2010), Giorgio, Nistico and Traficante (2016), Enders, Muller and Schollc (2010) and Ramasamy and Abar (20150 have documented the fiscal policy – exchange rate linkage.

REXP is recurrent expenditure: Recurrent expenditure is unproductive government expenditure on day to day running of government functions.

101 Recurrent expenditure are obvious fund embarked for salaries and wages, transfers to pension and social programmes, interest payment and provision of subsidies on specified type of consumption among others. Asegehegn (2016), M‘Amanja and Morrissey (2005), Agu, Idike, Okwor and Ugwunta (2014), Babalola and Aminu (2011), Shijaku and Gjokuta (2013), Morina (2017) and Abdiweli (2005) see recurrent expenditure as an important fiscal policy measure of a government.

CEXP is capital expenditure: Capital expenditure is productive investment expenditure by government that creates employment, improves incomes and better the standard of living of the people. Capital expenditure is evidence in funds allocated for construction of roads, telecommunication and transports, hospital, school and industrial edifices. Adigwe, Anyanwu and Udeh (2016), Ogbole, Amadi and Essi (2011), Nwankwo, Kalu and Chiekezie (2017), Saqib and Aggrarwal (2017), Najaf (2016), Khare (2016), Noman and Khudri (2015), Macek and Janku (2014) and Audu (2012) see capital expenditure as a perquisite to realizing a desired level of economic growth and development.

FD is fiscal deficit: Fiscal deficit is government borrowing to finance expenditure that could not be covered by revenue. In other words, fiscal deficit occurs when government expenditure is in excess of revenue. Nigeria has continuously operated on fiscal deficit over the years with the sole aim of accelerating growth and development. Nwakoby, Okaro and Ananwude (2016), Dockery, Ezeabasili and Herbert (2012), Kosimbei (2009), Srivyal and Venkata (2004), Lozano (2008), Johnson (2014), Milo (2012), Zuze (2012) and Umeora and Ikeora (2016) utilized fiscal deficit as a fiscal policy tool of the government.

102 is a constant term, is the error term and is the time trend incorporated in any regression model based on the classical assumption of a linear regression model to account for variables omitted in the model.