Title: Fiscal Activism or Market Discipline? Applying Keynes-Hayek Lessons from the great debate to Nigeria's Economic Reforms
Authors: Alfred Ayodele Meseko PhD, Juliana Eleojo Shaibu, Umoru Reuben Danjuma, Ocheni Christian Odiba
Volume: 9
Issue: 9
Pages: 122-127
Publication Date: 2025/09/28
Abstract:
Nigerian government recent economic reforms that sees major shakes up in government policies including major reforms like the removal of fuel subsidy and unification of exchange rate have reignited the debate among economists and social critics on the appropriate balance between fiscal activism and market discipline to achieve macroeconomic stability. This study draws on economic principles generated during the period of great economic debate in the 1930s to 1940s from foremost economists Maynard Keynes and Friedrich Hayek and their colleagues on how the government should have responded to the great depression that started in America in 1930s and gradually spread throughout the world. Even though their positions were seen by many to be contradictory, some economists believe they were also complimentary. The Keynesian theorists were in favour of countercyclical fiscal interventions to address economic shocks and stimulate aggregate demand, Hayekian theorists highlight market led resource allocation, sensitivity to price signals, institutional discipline and focus on long-term efficiency. The study shows how the Nigeria government can leverage on this debate to reform the economy. Targeted short-term stimulus, protection of price signals, financial transparency, investment in the supply side, and building of formidable institutions are the recommended policy guides.