FISCAL DEFICIT ON CAPITAL PROJECTS AND ECONOMIC GROWTH IN NIGERIA: THE NEXUS (original) (raw)
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Fiscal deficit and growth in Nigeria economy
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This study examines the impact of fiscal deficit on economic growth in Nigeria for period of 1980 to 2018. Sequel to the mixed level of stationarity of the variables as evidence in the result of the unit root test, this study adopts auto-regressive distributed lag (ARDL) technique and the result of the study shows that fiscal deficit is detrimental to economic growth in Nigeria. This study is in tandem with neoclassical paradigm. The study argues that one of the main reason why fiscal deficit is adversely affecting the economic growth in Nigeria is because of the pattern of her public spending which is heavily skewed in favour of recurrent expenditure which may not stimulate growth. Thus, the study recommends that government should review her pattern of spending to favor productive sector by so doing the economy will strive to greatness. Also, government should minimize her borrowing and look inward for ways to generate revenue. Lastly, if government wants to operate fiscal deficit,...
Fiscal Deficit And Economic Growth, Nigeria Experience
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This study examines impact of fiscal deficit on the growth of Nigerian economy using co-integration and error correction. Secondary data were gathered from various sources such as; the Central Bank of Nigeria statistical bulletin, economic and financial review monthly and annual reports and statement of accounts for various years. The time series property of the data employed, are first to be investigated. This is then followed by testing for co-integrated variables. From the unit root test, the results clearly indicate that the variables are integrated of the same order at first difference. Also, from the multivariate co-integration test, within the Auto-Regressive Distributed Lag (ARDL) the results indicate that there are, at most, two co-integrating vectors. This implies that there exists a stable long-run relationship between economic growth and budgeting components. From the study, it was discovered that deficit budget is one of the indicators of macroeconomic instability and s...
FISCAL DEFICIT AND ECONOMIC GROWTH IN NIGERIA (1970-2011): A DISAGGREGATED APPROACH
The role of expansionary fiscal policy on economic growth has generated series of intellectual brainstorming on whether a prolonged deficit budget induces or reduces national output particularly in the developing economies. The outcome probably depends on how the deficit is being financed and its distribution between capital and recurrent expenditure. This paper examines the impact of fiscal deficit and a disaggregated government expenditure on economic growth in Nigeria from 1970 to 2011 using autoregressive distributed lagged (ARDL) approach. It further investigates the nature and direction of causality between economic growth and the explanatory variables. The ARDL estimation reveals that a percentage increase in fiscal deficit expands the national output by 10.05% while a 10% increase in government capital expenditure in Nigeria increases the growth rate of the economy by 62.21%. However, recurrent expenditure has no significant impact on economic growth. On the direction of causality, a unidirectional causality is found running from capital expenditure to economic growth, while no causality between recurrent expenditure and economic growth and also between fiscal deficit and economic growth. From the analyses, it has been empirically confirmed that deficit budget and capital expenditure in Nigeria are growth inducing, therefore we recommend a sustainable and absorbable deficit budget which should be geared towards capital projects like infrastructural and human capital development to achieve sustainable growth and development, not as it is currently being directed towards unproductive and insignificant recurrent expenditure.
This study examines the effects of fiscal deficits on economic growth of the Nigerian economy. The study explore the trend of fiscal deficits over the three decades and showcase its implications on output growth and other macroeconomic indicators. While the issue of fiscal balance remain a prime macroeconomic objective of the Nigerian economy, fiscal deficit has serious implications on the economic and social welfare of a given economy. The study adopts the VAR technique and Johansen cointegration test to determine the possible existence of long-run relationship and other impacts among the variables. Estimated result from the Johansen cointegration test indicates two cointegrating relations between the variables as revealed by both the trace statistics and the maximum eigen value, while the error term is found to be negative and significant indicating a moderate convergence to the long-run equilibrium. It is established by the trend analysis that fiscal deficit adversely affects output growth rates and this situation has been prominent in the domestic economy from the last three decades. Other empirical results show evidence in favour of the negative effect of deficits on economic growth within the sample period. This result is consistent with the epistemological approach of neo-classical theory which established that deficit has growth-retarding effects on the economy. There is need for appropriate accountability in the public sector such that all spending are justified, and government activities are directed in accordance with the principles of equity and efficiency.
IMPART OF BUDGET DEFICIT ON ECONOMIC GROWTH IN NIGERIA (1980-2016)
This research work empirically ascertains “Impact of Budget Deficits On Economic Growth in Nigeria” form 1980 to 2015. The main objectives of the research are; to investigate the impact of government budget deficits on economic growth in Nigeria. Secondly is to determine the causal relationship between budget deficits and economic growth. The method adopted the ordinary least squared technique (OLS) which is employed on the multiple linear regression models. The variables employed are; Government Budget Deficits (GDB), Money Supply (M2), Inflation (INF), Private Investment (PI) and Private Savings (PS) and are stationary at level form. The regression result shows GBD and M2 to have a negative impact on economic growth under the period reviewed. The t-statistic test shows, GBD, M2, INF and Ps are statistically insignificant; PI is statistically significant concluding that GBD has no significant impact on economic growth. The f-statistic test shows that the variables are statistically significant on the entire regression panel. The Durbin Watson results identify presence of autocorrelation. Furthermore the findings identify a causal relationship between GBD and economic growth. The research thus recommends; government should redirect it expenditure towards goods that stimulate production and enhance economic growth, fiscal discipline should also be encouraged, government fiscal policy should be focus on diversifying the economy and to ensure friendly tax policy to encourage private investment.
Empirical Analysis of the Impact of Fiscal Policy on Economic Growth of Nigeria
International Journal of Economics and Finance, 6(6), 203-211, 2014
This study provides empirical analysis of the impact of fiscal policy on economic growth in Nigeria. Time series data from 1986 to 2010 relevant to the study were collected from the Central Bank of Nigeria statistical bulletin, Volume 22 and the National Bureau of Statistics. The ordinary least square method of multivariate regression was utilized in analyzing the log-linearized Model. The Augmented Dickey-Fuller unit root test was employed to establish the stationarity of the variables while the General-to-Specific approach to Autoregressive Distributed Lag (ARDL) model was used for testing for the existence of long-run and short-run equilibrium conditions. The findings were that, there is evidence of long run equilibrium relationship between fiscal policy and economic growth in Nigeria during the period studied. The adjusted R 2 value of 0.6850 showed that about 68.5% of the total variation in the real GDP is explained by the independent variables included in the model. Specific fiscal policy variables that have significant and positive impact on economic growth in Nigeria are government recurrent and capital expenditures. Non-oil taxes and government total debts have no significant impact on real GDP. Only capital expenditure has short run equilibrium relationship with economic growth. It is therefore recommended that government should establish a strong fiscal responsibility and transparency system in the fiscal institutions; and tax reforms should be such that would encourage increase in investment and fight corruption. Government debts should be channelled towards provision of critical infrastructure so as to provide the enabling investment environment, while fiscal policy should be complemented with the use of effective monetary policy.
THE IMPACT OF FISCAL DEFICIT ON THE ECONOMIC GROWTH OF NIGERIA
The history of fiscal deficit in Nigeria dates as far back as the 1970s. Several researches conducted to find out the reason for these deficits suggested that, it was prompted by the oil shock which induced public spending that increased government total recurrent expenditure from N3, 819.20 million in 1977 to N4, 805.20 million in 1980 and further to N36, 219.60 million in 1990 (CBN 2007, 2008); and the huge public debt which grew beyond the debt-service ability of the economy (Oluba 2014). However, the sustained impact of these factors, coupled with a few others resulted to a sharp increase in fiscal deficits which turned out to be a recurring issue (Oluba 2014). This work will employ the epistemology methodological approach to seek out answers to the task at hand. Epistemology is deemed appropriate considering the context of the work which will exploit known conditions and their relationships to draw its conclusion. The empirical analysis would suggest the existence of both a positive/negative relationship between government expenditure and economic growth, and a positive/negative relationship between fiscal deficits and economic growth. Based on the F-statistics result (Fc> Ft) for both independent variables (BD and GEXP), the study would conclude if the fiscal deficits have significant impact on economic growth in Nigeria.
Theoretical Review of the Impact of Fiscal Deficits on Economic Growth in Nigeria
The growth and persistence of fiscal deficits in both the industrialized and developing countries has brought the issue of fiscal deficits into sharp focus. Over the last decade, the growth impact of fiscal deficits has generated large volume of both theoretical and empirical literature. Despite the lofty place of fiscal policy in the management of the economy, the Nigerian economy is yet to come on the path of sound growth and development. The behaviour of fiscal deficits in Nigeria has followed unsteady pattern, assessing the significance of the policy deficits. The actualization of sustainable economic growth is more imperative such that the country is working towards achieving the sustainable development goals. The paper adopted a descriptive method to show the trend of fiscal elements in Nigeria with the aim of determining the relationship between the variables specified. The paper concludes that fiscal operation is ineffective in providing the needed macroeconomic environment for sustainable growth. This paper further suggests that powerful pro-stability stakeholders strong enough to challenge government fiscal recklessness will need to emerge for sustainable and progressive development to be attained at all levels.
R S Impact of Fiscal Deficit financing on Macroeconomic Growth in Nigeria
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Fiscal deficit refers to the excess of public sector's spending over its revenue. The work examines the relationship between fiscal deficit and the Nigerian economy; the overall objective being to assess and investigate the impact fiscal deficit has on the economy given some variables. The result showed that fiscal deficit has made a significant contribution to GDP and economic growth of the country Nigeria.
Deficit financing and economic growth , 2022
The study examined the effect of deficit finance on Nigeria economic growth. The main objective of the study is to empirically examine the effect of deficit financing on Nigeria’s economic growth. The study used secondary data from CBN statistical bulletin on various issues as relevant for the period under study (1981-2020). Augmented Dickey Fuller (ADF) unit root test, Johanson Co-integration test and normality test were employed for the analysis. The research findings revealed that deficit financing through External debt borrowing has a significant negative effect on Nigeria’s economic growth. Also Domestic debt has a positive significant effect on Nigeria’s economic growth, while Debt service has no significant effect on Nigeria’s economic growth. The study therefore, recommends that Government should set up monitoring teams that will make sure that the budget is well and carefully implemented and as well as loan borrowed in other to reduce corruption, linkages and wastages, the team will do this by holding everyone accountable for every kobo of government money spent.