Quest Journals Journal of Research in Business and Management Volume 9 ~ Issue 1 (2021) pp: 42-49 ISSN(Online):2347-3002 www.questjournals.org *Corresponding Author: Ighoroje, Ese James 42 | Page Fiscal Policy and Industrial Sector Output In Nigeria 1’ Ighoroje, Ese James 2’ Akpokerere, Othuke Emmanuel (Ph.D) Department of Banking and Finance, School of Business Studies, Delta State Polytechnic Ozoro, Delta State, Nigeria. ABSTRACT The paper studied fiscal policy and industrial sector output in Nigeria within a time period spanning 1987 to 2019. Fiscal policy was disintegrated into government expenditure, tax revenue and budget deficit while industry sector output was measured as the GDP contribution from the industrial sector. The model developed was analysed using multiple regression methods based on Johansson cointegration Error Correction Modelling. The results showed that fiscal policy has a long run and short run effect on industry sector output. The specific results evidenced that government expenditure and budget deficit have significant positive impact on industry sector output in Nigeria; while tax revenue has positive but insignificant effect on industry sector output in Nigeria. The study posits that fiscal policy drives the industrial sector of Nigeria and thus recommended that should formulate and implement viable fiscal policy options that will stabilize the economy. KEYWORDS: Fiscal policy, Industrial Output and Gross Domestic Product Received 15 Jan, 2021; Revised: 28 Jan, 2021; Accepted 31 Jan, 2021 © The author(s) 2021. Published with open access at www.questjournals.org I. INTRODUCTION Nigerian real sector comprises five sectors which are agriculture, industry, construction, trade, and services (CBN, 2018). The industrial sector is the most significant and impactful of all the sectors in Nigeria. The sector consists of the Crude Petroleum & Natural Gas, Solid Minerals and manufacturing sub-sectors. The growth of Nigeria has reckoned the growth of industrial sector, especially the oil and gas sub-sector and recently effects has geared towards energising the manufacturing sub-sector to enhance productivity, local content, economic sustainability and development. The government through concerted fiscal policies, can support industrial sector. Fiscal policy is all the blueprint and strategies employed obtain revenues, make expenses and repayments in the process of controlling the economy (Geoff, 2012). The role of fiscal policy in promoting economic stability was recognized very slowly and not sufficiently until the Great Depression of the 1930s (Bhatia, 2002). In the 1950s and late 1960s, the Nigerian economy was relatively stable because the economy was based on the agricultural sector, while in the early 1970s, the pattern of the economy changed absolutely from agricultural sector to oil and gas sub- sector, which has resulted to the fluctuations in Nigeria’s investment climate. From the 1970s till date, the Nigerian economy has witnessed various degrees of shocks and disturbances. One of such effects is the low investment in manufacturing. The failure to achieve industrialisation, despite several industrial policies and reforms, is common amongst the developing countries including Nigeria. In the Nigerian context, there has been a protracted and steady decline in the sectoral contribution of the industrial sector to national productivity and hence economic development has been disappointingly low while poverty level has increased tremendously (Iwuagwu, 2009). The major channel of government efforts to industrialisation and enhanced economic development is the fiscal policy stance. This study thus sought to determine the effect of fiscal policy strategies on the industrial sector in Nigeria. Despite that the industrial sector isa vehicles for growth and development, industrialisation policies in Nigeria has not successfully driven the economy to development. There has been a steady decline in Nigeria industrial output over the years. The Keynesian school portends that fiscal policies could drive high level investment in the industrial sector. Extant literature shows that expenditure and revenue are the most prevalent fiscal policy stance tested in empirical studies, with exclusion of deficit finance by most studies (Imide, 2019; Oseni, 2015). Most of the reviewed concentrate on the manufacturing sub-sector (Eze & Ogiji, 2013; Osinowo, 2015; Arikpo, Ogar and Ojong,2017; Uffie & Aghanenu, 2019; and Imide, 2019), with an exception of Oseni