IMPACT OF FEDERAL GOVERNMENT DEFICIT BUDGET FINANCING ON ECONOMIC GROWTH IN NIGERIA
Abali Boniface, Eggon Ahmed Henry, Ph.D and Sabo Moses Ajidani, Ph.D
Volume 4 Issue 1
Abstract
The study examined the Impact of federal government budget deficit financing on economic growth in Nigeria for the period of 1987-2022. The study utilized secondary sources of data extracted from the Central Bank of Nigeria annual statistics bulletin 2022, The study undertook unit root test employing augmented Dickey-Fuller (ADF) method to determine whether the variables are stationary or not and the result shows that the variables are all stationary at 1(I). The study employed co-integration test and the results shows that there is evidence of long run relationship among variables; the study employed the generalized linear model (GLM) model for estimation. The findings showed that all the three variables multilateral borrowing (MUB), bilateral borrowing (BIB), and official development assistance (ODA) has positive and mixed statistically significant and insignificant impact on gross domestic product in Nigeria during the period under study. Therefore, the study concluded that budget deficit financing generally has positive impact on gross domestic product but statistically mixed significance influence on gross domestic product in Nigeria during the period of the study. The study recommends that government should be prudent to consider strategic external and domestic borrowing. However, caution should be exercised to prevent overreliance on external debt and the associated risks. It is essential to carefully assess borrowing terms, negotiate favourable interest rates, and maintain a manageable debt-to-GDP ratio. Additionally borrowing should be directed towards productive investments that generate long-term economic benefits. Keywords: Budget Deficit, Multilateral Borrowing, Bilateral Borrowing, Official Development Assistance, Economic growth
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