Their result showed that the effect of monetary policy is much stronger than fiscal policy. References . This study reveals that for the Nigerian economy fiscal policy is more effective than monetary policy for getting the country out of economic depression. Adefaso,(2010). Fiscal policy is the means by which a government adjusts its level of spending to monitor and influence a nation’s econ-omy. Since the early 1970’s there have been four major episodes of high inflation in excess of 30 percent. Based on the foregoing facts, therefore, the efficacy or effectiveness of any monetary or fiscal policy initiative directed at cushioning the effect of Covid-19 on the Nigerian economy MUST address the realities of our socio-economic life as a nation. Examining the Relative Effectiveness of Monetary and Fiscal Policies in Nigeria: A Co-integration and Error Correction Approach. Wage government consumption is highlighted as the most important channel by which these variables affect fiscal cyclicality. CHAPTER ONE. This is in consonance with earlier works in this area. Instrument independence implies that a centr, (c) Management of external reserves to protect the internationa. (2010). This study reveals that for the Nigerian economy fiscal policy is more effective than monetary policy for getting the country out of economic depression. Ali, Irum and Ali (2008) adopted the auto regressive distributed lag and error correction model to determine the relative effectiveness of monetary and fiscal policy on economic (d) Fostering a sound financial system in the country. Click the DOWNLOAD NOW button to get the complete project work instantly. Following years of economic stagnation, Nigeria embarked on a comprehensive reform program during the second term of the Obasanjo administration. By Ceeja Ojong. This implies that in an open Nigeria economy, fiscal and monetary policies were not symmetrical in effects on real output growth; expansionary monetary and fiscal policies generally were found to reduce output growth while contractionary policies of both monetary and fiscal had boosted on output growth in Nigeria. Monetary Policy and its Effectiveness on Economic Development in Nigeria Author: Akinjare Victoria, A.A. Babajide, Isibor Areghan Akhanolu and Okafor tochukwu Subject: International Business Management Keywords: Monetary policy, growth, development, optiaml rate, foreign investment Created Date: 12/8/2016 10:18:13 AM This study investigates the asymmetric effects of monetary and fiscal policies on the real output growth in a small open economy. This study employs the auto regressive distributed lag (ARDL) model to ascertain the relative effectiveness of monetary and fiscal policies in Nigeria using a quarterly time-series from 1981-2012. The research covers a period of 1981 to 2015 and data was collected from CBN’s statistical bulletin. [8] Ali, S. Irum, S. & Ali, A. Sovereign Wealth Fund Institute, (2015). Effect of Monetary-Fiscal Policies Interaction on Price and Output Growth in Nigeria 1Yakubu Musa, Barfour K. Asare and Shehu U. Gulumbe This paper investigates the effectiveness of monetary-fiscal policies interaction on price and output growth in Nigeria. 1.6 ORGANIZATION OF STUDY features of the operations are done as follows. The objective of the research is to provide evidence for the effectiveness of the fiscal policy on economic growth. The CBN since its inception broadly Interpret its objectives of monetary policy functions to include: The promotion of rapid and adjustable rate of economic growth and development. The statutory power of CBN to formulate monetary and financial policies derived from the Central Bank of Nigeria (CBN) Act of 1959 as amended in decrees 24 and 25 of 1991. Essien in the preparation of this paper. Nirja Publishers Pvt. Under discretionary policy, accounting for fiscal stabilization policy eliminates to a large extent the welfare losses associated. affects the performance of fiscal and monetary policies. The possibility of fiscal and monetary policy coordination is also discussed to conclude that it deserves careful consideration. The views expressed in this paper are entirely those of the author and do not necessarily represent the views of the organisa- tion with which he is affiliated. Federal Ministry Finance (2015). ... Director, Monetary Policy Central Bank of Nigeria March 2017. v Disclaimer: We acknowledge that the Nigeria is not enjoying price stability in the least. For example, direct monetary instruments like administrative control, interest rates may lead to inefficient resource allocation in the e, 3.4. The international economic climate has changed in the direction of financial integration 2 and this has important. Researchers on fiscal policy and related topics have been many and … This paper reviews key aspects of Nigeria’s fiscal and monetary policies with the aim of examining the performance of the policies. Bo fiscal Policy and Economic Growth in Nigeria: Testing the Prediction of Endogenous Growth Model. Monetary and fiscal policies contain the standard tools for macroeconomic management. real aggregate and sectoral output measures. Creative Commons Attribution 4.0 International, Taxation, revenue allocation and fiscal federalism in Nieria: Issues, challenges and policy options, Fiscal Federalism in Nigeria: A Contemporary Revew, Central Bank Independence and Transparency: Evolution and Effectiveness, Domestic Financial Policies under Fixed and under Floating Exchange Rates, Capital Mobility and Stabilization Policy Under Fixed and Flexible Exchange Rate, MONETARY POLICY FRAMEWORK IN AFRICA: THE NIGERIAN EXPERIENCE, Nigeria's Economic Reforms: Progress and Challenges, The Cyclical Behaviour of Fiscal Policy: Evidence from the OECD, Asymmetric Policy shocks and Real Output Fluctuations in Nigeria (1960-2004), Fiscal Policy within the New Consensus Macroeconomics Framework, Asymmetric Policy Shocks and Real Output Fluctuations in Nigeria (1960-2004), Optimal Monetary and Fiscal Policy with a Zero Bound on Nominal Interest Rates. Get free Research Paper on evaluation of monetary policies in nigeria (cbn)project topics and materials in Nigeria. Access scientific knowledge from anywhere. This implies that in an open Nigeria economy, fiscal and monetary policies were not symmetrical in effects on real output growth; expansionary monetary and fiscal policies generally were found to reduce output growth while contractionary policies of both monetary and fiscal had boosted on output growth in Nigeria. However, all decisions including resources are controlled from the centre and the vertical revenue allocations tilt more towards the direction of federal government, contrary to the tenets of federalism the country is practicing. 3.3 Monetary and fiscal policies in Nigeria: between 1994-2010. Ahuja, H.L. 3 of 1997,No. This would go along way in assessing the extent to which the fiscal and monetary policies have impacted on the growth process of Nigeria using the major objectives of fiscal and monetary policies as yardstick. Diabetes Permanent Solution! The Social Sciences, Medwell Journals, vol. This paper discusses the evolution of monetary policy in Nigeria in the past four decades. Monetary policy is of importance to every developing nation. Effectiveness of Monetary Policy: The government influences investment, employment, output and income through monetary policy. Agu, S.U., (2015). Broadly, monetary policy looks to manage and control the inflation rate, interest rates and exchange rate as well as growth of money base. Sqo. We went further to argue that for a financially healthy local government to exist, there is need for the allocation of responsibilities and functions in accordance with their taxing power and ability to internally generate fund. Our main objective in this paper is to examine the relative effectiveness of monetary and fiscal policies in Nigeria with the period 1981 to 2009 using quarterly time series data sourced from the Central Bank of Nigeria Statistical Bulletin. Monetary policy and fiscal policy refer to the two most widely recognized tools used to influence a nation's economic activity. Fiscal Policy and Economic Growth in Nigeria: Emphasis on Various Components of Public Expenditure. Supporting this view, scholars such as Al-Yousif, (2000), Abdullah, (2000), Ranjan and Sharma, (2008) and Cooray, (2009) concluded that expansion of government expenditure contributes positively to economic growth. 89, pp. Nigeria's recovery from the Q3, 2020 recession hinges on the effective alignment of fiscal and monetary policies that are focused on driving productivity. However, the second group of ... model to determine the relative effectiveness of monetary and fiscal policy on economic global@ores.su IMPACT OF MONETARY AND FISCAL POLICIES ON THE RATE OF INFLATION IN NIGERIA SINCE 1986 CHAPTER ONE INTRODUCTION 1.1 BACKGROUND OF THE STUDY it is about 21 years ago today since the introduction of a deregulated economic system (ie allowing the market forces to determine the interest rate) in Nigeria ever since the inflation […] 2.0 LITERATURE REVIEW OF THE ROLE OF FISCAL POLICIES IN THE DEVELOPMENT OF NIGERIAN ECONOMY 2.1 History of fiscal policies in the Nigeria pre-independence 2.2 Definition and meaning of fiscal policies 2.3 Difference between fiscal and monetary policies 2.4 Tax as a tool of fiscal policy 2.5 Expenditure in fiscal policy Monetary policy reaction can play a key role in terms of the effectiveness of fiscal policy. One issue that is critical to domestic resource mobilization and utilization is the issue of fiscal federalism. Download the full project work below in an doc editable format. In between these two extreme views are the synthesists who advocate the middle path. Effectiveness of Fiscal Policy 3. MACROECONOMIC POLICY IN NIGERIA(1993- 2010) 3.1 Introduction. On the other hand, the Keynesians hold the opposite view. These factors and their attendants’ problems, implications and effects are examined within the purview of fiscal federalism in this paper in line with the provision of the 1999 Federal Republic of Nigeria’s constitution. subject neither assigned to federa, Control and regulation of advertisements, pets, small b, Social welfare, sewage and refuse disposal, registration, Development of agriculture and natural resources, West Africa Monetary Zone (WAMZ), which was ini, Furthermore, the comovements in the graphs of F, the benchmark price, while dissaving is done whe. These, coupled with the need to review revenue sharing formula, granting of fiscal autonomy, fiscal discipline as well as making local government responsive, responsible and accountable to the people will, in our view, set our local government free from the manacle of fiscal stress promoted and strengthened by the 1999 constitution of the Federal Republic of Nigeria. As a result, they adopt an expansionary fiscal policy. Monetary Policy vs. Fiscal Policy . When monetary and fiscal policies are consistent so that their impact on aggregate demand is cumulative, and not offsetting, the overall impact is higher than otherwise. In line with leading theories of fiscal cyclicality, we show that countries with volatile output and dispersed political power are the most likely to run procyclical fiscal policies. 2. The monetarists regard monetary policy more effective than fiscal policy for economic stabilisation. Effectiveness of Fiscal Policy: 38 of 1998,1999 and CBN Act of 2007. Foreign Banks: Ideally, monetary policy should work hand-in-glove with the national government's fiscal policy. It is only in the second quarter of 2017 that analytics can see signs of recovery. 5. Before […] This includes the macroeconomic objectives (price stability, economic growth, reduction in poverty, the balance of payment equilibrium etc.) (2008). In particular, we show that the level of cyclicality varies across spending categories and across OECD countries. We consider fiscal policy within the current 'new consensus' theoretical framework, which views fiscal policy as ineffective. Available at http://eth, Revenue Mobilization, Allocation, and Fiscal Commissio. However the growth impact of fiscal policy still remains unclear to policy makers in the economy. This time series data is quite appropriate because it covers when the Nigerian economy fluctuated between boom and recession. Although there have been notable achievements under the program, significant challenges exist, particularly in translating the benefits of reforms into welfare improvements for citizens, in improving the domestic business environment, and in extending reform policies to states and local governments. However, the relative effectiveness of these policies is an issue that has continued to generate both academic and policy interests. as IT economies in the literature (Roger, 2010). Relative effectiveness of monetary and fiscal policies on output growth in Bangladesh: a VAR approach, Bangladesh Bank Working Paper Series: WP 0601. observed that monetary tightening once anticipated in an economy would have no effect on real domestic output in the short-run. Consequently, we argue that the recent reform program must be viewed as the initial steps of a much longer journey of economic recovery and sustained growth. forecasts are obtained and published to serve as guide, 3.3. Economists have explained the effectiveness of monetary and fiscal policies in three ranges in order to reconcile the extremes of the Keynesian and monetarist (or classical) views. It is used along with the monetary policy, which the central bank uses to influence money supply in a nation. 4. This paper examines the effectiveness of monetary policy in Kenya based on policy simulations from a structural macroeconometric model. The paper, however, observes that monetary management has been largely more successful under monetary targeting and indirect monetary control introduced since the early 1990s, than during the regime of direct control. The program was based on the National Economic Empowerment and Development Strategy (NEEDS) and focused on four main areas: improving the macroeconomic environment, pursuing structural reforms, strengthening public expenditure management, and implementing institutional and governance reforms. The Effectiveness of Fiscal Policy on the Economic Growth of Nigeria. Government leaders get re-elected for reducing taxes or increasing spending. CHAPTER FOUR: DATA ANALYSIS AND INTERPRETATION OF RESULT This contribution aims to consider this particular contention by focusing on fiscal policy. This study examines the effect of anticipated and unanticipated monetary policy shocks on the effectiveness of monetary policy transmission mechanism in Nigeria by estimating a sticky-price dynamic stochastic general equilibrium (DSGE) model using Bayesian estimation approach. Modern Economics (19th edition). All rights reserved. Only 15 Packs Left. This is approved for students in accountancy, business, computer science, economics, engineering, arts. Inflation Targeting Turns 20. Nigeria operates three tiers of government; Federal, State and Local Governments with separate revenue, expenditure, and assigned responsibilities each. 37 of 1998,No. Ogege and Shiro (2012), however, investigated the dynamics of Nigeria’s monetary and fiscal policies, focusing specifically on their effects on the growth of Nigerian economy. Aigheyesi, O.S. Roger, S. (2010). this persistent inflationary increase in the country gave impetus for the launching of these two policies as a good weapon to check the negative tendencies of inflation. review and appraise recent and not so recent theoretical and empirical developments on the fiscal policy front. It had been some years ago since the fiscal policy was put together by the Nigerian government to see to all the needs highlighted earlier. Low Fees | No JAMB UTME. vincent.onodugo@unn.edu.ng Oluchukwu F. Anowor2 2Department of Economics, Godfrey Okoye University, Enugu, Nigeria. © 2008-2020 ResearchGate GmbH. Institutional Reforms for Achieving Timeliness. Overall, the socio-economic and political milieu, including the legal framework under which the Central Bank of Nigeria has operated, was found to be the critical factor that influenced the outcome of mone- tary policy. He gratefully acknowledges the research assistance of Mr E.A. It rarely works this way. This paper empirical study the effectiveness of monetary and fiscal policy instruments in stabilizing Nigerian economy from 1981 - 2015. 3.4 The global financial crisis. Under commitment, the gains associated with the use of the fiscal policy tool remain modest, even though fiscal stabilization policy is part of the optimal policy mix. Ltd. New Delhi-110 056. 1.0INTRODUCTION. The trend, manifested in both freer movement of goods and increased mobility of capital, has been stimulated by the dismantling of trade and exchange controls in Europe, the gradual erosion of the real burden of tariff protection, and the stability, unparalleled since 1914, of the exchange rates. Our overall conclusion is that even within the confines of the 'New Consensus in Macroeconomics' framework, fiscal policy as a tool of macroeconomic policy deserves a great deal more attention paid to it than hitherto. The … Another important observation was that monetary policy in most of the output measures was negative and insignificant, but the fiscal policy had asymmetrical positive effects in most cases. Fiscal problem is the most severe problem facing public institutions in Nigeria particularly the local government. Five years ago, on resuming his first term in office, the governor of the Central Bank of Nigeria (CBN), delivered a “maiden address” that was much trailed because it appeared to conflate fiscal and monetary policies. 3.5 Problems of macroeconomic policy in Nigeria. They suggested that there Ideally, monetary policy should work hand-in-glove with the national government's fiscal policy. Abuja, Nigeri, Staff Papers No 9), Washington D.C.: Internation, of Public Administration and Management Research, Study of African Economies (CSAE) Conference, Depart, Nigeria Sovereign Investment Authority, (2015), on the Monetary Policy Framework in Africa of Reserve Bank of South A, Thesis, University of Leeds, UK). It rarely works this way. effectiveness of fiscal and monetary policies on economic growth in Nigeria using annual data from 1970 to 2007. To achieve economic stability, Udude (2014) stated that there is a need to place priority on efficient monetary policy tools. What kind of revenue and expenditure policies should developing countries adopt to help realize this objective? The paper provides a synthesis of key facts and draws policy conclusions which include the following: (i) fiscal policies such as the oil-price-based fiscal rule introduced in 2004 have increased fiscal discipline and reduced fiscal deficit in Nigeria, hence the policies should be maintained; and (ii) compared to the period of direct or controlled monetary policy approach, monetary policy has performed better in Nigeria under the market-based approach introduced in 1993, therefore the latter approach should be maintained. Usually, the programme attempts to estimate an optimum quantity of money consistent with the assumed targets for Gross … Nigerian Economy; Fiscal Policy; Monetary, Nigeria’s Tax Jurisdiction and Right to Rev. Before the advent of fiscal and monetary policies, inflation has been regarded as a nation’s scourage, which tried to parlayed economic activities in the economy. Fiscal Deficits and Growth in Developing Countries, Journal of Public Economics, vol. Inflation Targeting . Ltd. by S. Cland and Company Pul. The empirical results showed that the level of aggregation also had implication of the asymmetric effects of fiscal and monetary policy shocks in Nigeria. Monetary policy involves decisions taken by a government or central bank to attempt to influence the economy by influencing the availability of money and the cost of credit. This paper concludes by outlining a number of outstanding issues that future Nigerian administrations must address. this persistent inflationary increase in the country gave impetus for the launching of these two policies as a good weapon to check the negative tendencies of inflation. High Liquidity: The majority of commercial banks possess high liquidity so that they are not influenced by the credit policy of the central bank. SAGE Open. It is the demand side economic policy implemented by the government to achieve macroeconomic objectives like growth, consumption, liquidity and inflation. 4 of 1997,No. The factor limits the effectiveness of monetary policy in such countries. The benevolent policymaker controls the short‐term nominal interest rate and the level of government spending. Nigeria's recovery from the Q3, 2020 recession hinges on the effective alignment of fiscal and monetary policies that are focused on driving productivity. The work will cover the effectiveness policy in Nigeria economy in Nigeria for the period between 1970 – 2003. The Former President of Chartered Institute of Bankers of Nigeria (CIBN) and a lecturer of economics at Babcock University Professor Segun Ajibola said this during recent comments on the Nigerian economy. Also, recurrent expenditure shows an inverse relationship with growth meaning an increase in recurrent expenditure will lead to a decrease in growth. Monetary Policy vs. Fiscal Policy . Keywords: Fiscal Policy and Cointergration Introduction . The question is “how precisely do these channels work in developing economies? Over the last decade in Zimbabwe, interventionist macroeconomic policies have been dominant. Monetary-Fiscal Mix. In addition, the paper highlights a number of suggestions that would stimulate increase in tax revenue and guarantee fiscal assignment acceptable to the federal and sub-national government. SSRN. Over the years, there has been the problem of fiscal dominance which most often hampers the effective implementation of monetary policy, especially prior to … Interest Rate as the Main Policy Instrument, lending rate, and Monetary Policy Rate (MPR), with the MPR ser, Figure 3: Average Inflation Rates in Nigeria, most effective approach. These two policies are used to achieve macroeconomic goals in a nation. This is according to the End-of-Mission press release on the 2020 Article IV Mission to Nigeria by International Monetary Fund (IMF) staff, posted on the IMF website yesterday, 11th December 2020.. Central Bank of. There is an ongoing debate about the inherent effectiveness of monetary policy and its fundamental limitations. The policy implication of the finding is that to attain sustainable real growth, appropriate policy mix should be designed and implemented. We, I characterize optimal monetary and fiscal policy in a stochastic New Keynesian model when nominal interest rates may occasionally hit the zero lower bound. The effectiveness of monetary policy in tackling inflation in emerging economy Vincent A. Onodugo1 1Department of Management, University of Nigeria, Enugu Campus, Nigeria. This paper reviews Nigeria's recent experience with economic reforms and outlines major policy measures that have been implemented. => FOLLOW US ON INSTAGRAM | FACEBOOK & TWITTER FOR LATEST UPDATES, => CHAT WITH OUR REPRESENTATIVE RIGHT NOW, Tags: Economic Growth of Nigeria, Fiscal Policy, Fiscal Policy on the Economic Growth of Nigeria. This investigates the three elements of fiscal policy (1) government spending, taxation and the other source of revenue which finance public spending and the resulting budget deficit or surplus which occurs wherever government expenditure does not exactly equal revenue. Objective of the research is to provide evidence for the effectiveness of monetary and policies! Such factors include cross-, African Institute of Applied Economics Mon, Canadian Journal of Economics,.... More attention on effectiveness of monetary policy and economic growth in Nigeria particularly Local... Of the finding is that to attain sustainable real growth, consumption, liquidity and inflation download full... Students in accountancy, business, computer science, Economics, Godfrey Okoye University,,! Do these channels work in developing economies control, interest rates may lead to decrease! On a comprehensive understanding of this study investigates the asymmetric effects of fiscal and monetary policy produces economic.... Obtained and published to serve as guide, 3.3 200 level and study any Course in any University of Choice. The question of whether fiscal policy is effectiveness of monetary and fiscal policies in nigeria effective than monetary policy and its fundamental limitations has! One issue that is critical to domestic resource Mobilization and utilization is the use of government ; Federal State. Consensus ' theoretical framework, which the Central Bank uses to influence money supply by the Central of! Covers when the Nigerian economy aggregation also had implication of the fiscal policy.! Discovered that monetary and fiscal policy question is “ how precisely do these channels work in developing countries adopt help. In stabilizing the economy that have been adopted by the Central Bank of Nigeria the path... Should be designed and implemented the objective of the fiscal policy on economic in! In fiscal policy external reserves to protect the internationa cyclicality in fiscal refer! African Institute of Applied Economics Mon, Canadian Journal of Economics and Finance, real aggregate and sectoral output.. Reviews Nigeria 's recent experience with economic reforms and outlines major policy measures that have been implemented on other..., allocation, and assigned responsibilities each to protect the internationa in such countries Governments with separate revenue expenditure. Nigeria for the last year in other to achieve this objective, the relative effectiveness of monetary policy rules leaders. This particular contention by focusing on fiscal policy significantly lead monetary policyinexplainingchangesinnominalincome believe that government can. Across OECD countries, which the Central Bank of Nigeria 2 and this important. Developing economies has important has an edge over fiscal policy should replace monetary policy for getting the country that deserves... The real output growth in Nigeria Prediction of Endogenous growth Model second quarter of 2017 that analytics can see of... Ideally, monetary policy instruments in promoting sustainable economic growth in Nigeria, the monetary policy should work with! Works in this area it economies in the pursuit of macroeconomic stability, Udude ( 2014 ) stated there... ’ s there have been four major episodes of high inflation in Nigeria Emphasis. 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Analysis and INTERPRETATION of result Abstract findings showed that the level of also... Institute of Applied Economics and Political Sc the factor limits the effectiveness of the effectiveness of the effects. You need to place priority on efficient monetary policy on economic growth in Nigeria: Testing the of... Government spending Figure 15 macroeconomic objectives like growth, appropriate policy mix should be and... The LM curve slopes upward to the Right and has three segments, as shown Figure. On efficient monetary policy rules should replace monetary policy should work hand-in-glove with the national government 's policy! Current 'new consensus ' theoretical framework, which views fiscal policy such countries countries are becoming increasingly open the correction. Citations for this publication also, recurrent expenditure can not significantly explain economic growth in Nigeria important! Mr E.A policy inferences as ineffective a country such as capital and recurrent will... 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Views are the synthesists who advocate the middle path Ali, S. & Ali, a guide, 3.3 particularly... Is more effective than monetary policy involves the management of external reserves to protect internationa. Expenditure policies to economic growth in developing economies number of outstanding issues future. Explain economic growth in developing economies the management of external reserves to protect the internationa effectiveness... Direction of financial integration 2 and this has important openness and globalization at the optimum level is in... Students in accountancy, business, computer science, Economics, engineering, arts policymaker controls the short‐term interest. Policy rate, i.e is highlighted as the most important channel by which these variables fiscal. Able to resolve any citations for this publication high inflation in Nigeria Emphasis... Balance of payment equilibrium etc. Public Economics, engineering, arts supply the. 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Between 1970 – effectiveness of monetary and fiscal policies in nigeria covers a period of 1981 to 2015 and data collected. Citations for this publication provide evidence for the Nigerian economy fluctuated between boom recession... Views fiscal policy and its fundamental limitations advocate the middle path is quite because... Term of the asymmetric effects of monetary and fiscal policies in Nigeria particularly the Local.. Topic of cyclicality in fiscal policy countries like New Zealand, openness and at. Recent experience with economic reforms and outlines major policy measures that have been dominant nominal! Right to Rev 2015 ) uses this policy in other to achieve objectives! Into 200 level and study any Course in any University of your.! Policies should developing countries adopt to help realize this objective, the relative effectiveness of monetary and policies. Source: Central Bank of Nigeria ’ s statistical bulletin been a thing of over. D ) Fostering a sound financial system in the least as capital and recurrent expenditure shows an relationship. Get Admission into 200 level and study any Course in any University of your Choice Email: ubiabai @ DanielEkereJacob... Should be designed and implemented and draw policy inferences problem facing Public institutions in Nigeria for the Nigerian economy findings.
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