Does Government Policies Improve Business Performance? Evidence from Nigeria

Abstract: This paper empirically examined the impact of government fiscal and monetary policies on business performance in Nigeria. The study which covered the period from 1970 to 2010 used secondary data. The study hypothesized negative relationship between inflation rates, value added tax, exchange rate and return on assets, which is the measure of business performance. Collected data were regressed using the Fully-modified OLS estimation technique while Augmented Dickey Fuller and Johansen Cointegration tests were used to determine the stationarity and long run properties of the variables. Findings indicated a negative relationship between monetary policy measures (inflation and exchange rate) and return on assets (ROA), while the impact of value added tax on ROA was positive. Hence, it was recommended that Nigerian government should be consistent and maintained its policy framework (fiscal stance, exchange rate policy, interest rate policy, and pricing policy) to spur confidence of foreign and local investors.