We, therefore, recommend that deficit financing in nigeria should. Impact of deficit financing on economic stability in nigeria. The concept of debt, whichever type or form, is a major problem militating against african development stride particularly countries like nigeria. Over the fy1969fy2018 period, the government generated a surplus on five. The empirical results showed that higher government spending does not hurt consumption, but instead raises private investment which in turn accelerates economic growth. Impact of budget deficit on economic growth of nigeria.
The debt profile of the government of nigeria has been on the. The study established a threshold level of 5% which is conducive for economic. Deficit financing in ghana has become an annual phenomenon mainly as a result of the countrys inability to raise enough revenue to finance its budget. Impact of budget deficit on economic growth of nigeria mensch. Return to article details deficit financing and economic growth in nigeria. This paper investigates the impact of inflation on economic growth and development in nigeria between 1970. It includes the thoughts of several researchers on the factors that led to fiscal deficit in nigeria, the effect of fiscal deficit on economic variables, the means of financing fiscal deficit, fiscal deficit and economic growth in developed and developing countries. The history of fiscal deficit in nigeria dates as far back as the 1970s. Aug 05, 2019 bridging nigerias infrastructure deficit. The study utilized data from publications of the central bank of nigeria statistical bulletin between 1981 2012.
The study established an optimal fiscal deficit level using the threshold autoregressive tar model. However, the major impact of the increase in budget deficit was felt in 1993, with high rate of inflation which shows an evidence of a positive relationship between budget deficit and inflation in nigeria, although other macroeconomic factors could have accounted for this. Budget deficit is an expansionary policy measure adopted when the economic growth of a country assume negative value but has become a norm in nigeria, download the full project work with reference and abstract. According to anyanwu 1997, the nigeria deficit was contracted for different reasons, such as financing of.
Oil price movements, deficit financing and economic growth. Public disclosure authorized nigeria developing housing. The study revealed that external source of deficit financing exf, nonbanking public. 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.
Deficit financing in nigeria, 196570 the journal of modern. Review of related literature concept and nature of deficit financing james 1982 states that deficit financing is destabilizing in a flexible price mode because instability results from debt growth increasing the interest rate which reduces investment and. The research findings revealed that deficit financing through external debt borrowing has a significant negative effect on nigerias economic. Analysis from the research indicates that ghanas budget deficit financing and economic growth are negatively correlated. Since 2001, nigerias nonoil economy has grown by more than 8 percent, more than twice the rate of growth over the previous fiveyear period. This study investigates the effects of fiscal deficits on nigeria economic growth from 19812014. The paper questions the extent to which domestic debt empirically impactt on economic growth in nigeria between 1981 to 2012. The resultant growth in public spending is expected to be financed by public revenue from taxes and non tax source but the revenues always lay behind the level of public spending, leaving large deficits in the focus. The research also showed that budget deficit financing increased in political election years of the country. This study sought to investigate the implications of deficit financing on economic stability in nigeria between 197020dy. The data for the study is collected from cbn statistical staple 2012. Deficit financing and the growth of nigeria economy by. Deficit financing in advanced countries is used to mean an excess of expenditure over revenuethe gap being covered by borrowing from the public by the sale of bonds and by creating new money.
A lot of economic problems are caused by deficits when it is in persistence specifically, deficit financing adversely impacts interest rate, investment and economic growth money creation via deficit financing results in an increase in the stock of money and this is inflationary. Secondary data was used and sourced from the central. The surpluses of these marketing boards in the period 194754 exceeded the total public revenue from each of the two major sources of taxation, i. Deficit financing, practice in which a government spends more money than it receives as revenue, the difference being made up by borrowing or minting new funds. Budget deficit, money supply and inflation have been regarded as some of the important factors on issues relating to economic growth and development in nigeria. The empirical analysis supported the existence of a significant positive relationship between economic growth and the regressors capital. The paper employed annual time series data from 1980 to 2014.
The essence was to help accelerate the growth of capital in nigeria using the policy of deficit budgeting as formulated by keynes. Furthermore, study thus validates the keynesian postulation of the existence of positive relationship between deficit financing and economic development. Impact of deficit financing on economic stability in. Public disclosure authorized nigeria developing housing finance. Effect of inflation on the growth and development of the. The impact of fiscal deficits on economic growth in nigeria. View of deficit financing and economic growth in nigeria. We, therefore, recommend that deficit financing in nigeria should be focused on the productive sectors of the economy. This made the country to join other countries like columbia and ghana, which also experience fiscal deficit. This study examines how the use of budget deficits as an instrument of stabilization leads to the accumulation of external debt with the attending.
Two null hypotheses to determine whether there is a significant relationship between inflation and deficit. Basically, the current study is designed to investigate the impact of oil price movement and deficit financing on economic growth in nigeria as its broad objective. In nigeria, to speed up economic growth after experiencing internationally oil glut, made government to spend more of it revenue. Fiscal deficit, financing options and macroeconomic stability. Abstract this study examined the impact of deficit financing on economic growth in nigeria for the period spanning from 1981 to 2016. More often than not the government of kenya resorts to debt financing options due to its ability of promoting economic growth. Economic growth, external debt and budget deficit in jordan. The federal republic of nigeria has experienced stable economic growth, averaging 8 percent, over the past decade. Economic growth, external debt and budget deficit in. Akinmulegun sunday ojo 1 1 department of banking and finance, adekunle ajasin university, p. The impact of budget deficit on economic growth of nigeria pdf. Consequently, this study is designed and intends to fill this knowledge gap by exploring the implication of deficit financing and economic growth in nigeria.
The study utilized data from publications of the central bank of. The impact of budget deficit on the nigerian economic. Effect of external budget deficit financing on economic. The study utilized data from publications of the central bank of nigeria. It was carried out to determine the longrun effect of deficit budgeting and the inflationary pressure in nigeria using times series data. The study investigates the interrelationships between deficit financing df, oil price movement and economic growth in nigeria.
Oil price movements, deficit financing and economic growth in nigeria. Although budget deficits may occur for numerous reasons, the term usually refers to a conscious attempt to stimulate the economy by lowering tax rates or increasing government expenditures. Government expenditure and economic growth in nigeria. As a result, this paper focused on the impact of external debt financing on economic growth in nigeria. Ezeabasili, isu, and mojekwu 2011 to investigate the relationship between nigerias external debt and economic growth between 1975 and 2006, a period characterized by external debt escalation using the cointegration approach, the study confirmed the existence of. On the other hand, the study found that a significant negative relationship exists between fiscal deficits, financial depth and economic growth in nigeria. The general objective of the study is to analyze the effect of deficit financing on the economy. Ezeabasili, isu, and mojekwu 2011 to investigate the relationship between nigeria s external debt and economic growth between 1975 and 2006, a period characterized by external debt escalation using the cointegration approach, the study confirmed the existence of. This study thus investigates the incessant rises in government expenditure and the implications of deficit financing on nigerian economic growth. In order to understand whether or not deficit financing impacts on economic growth. Sep 11, 2014 ascertain the extent deficit financing has impacted on the economic growth in nigeria within the period under study i.
It traces various governmental efforts in revamping the economy between 1970 and 2010, a period of 41 years. Fiscal deficit, financing options and macroeconomic. This situation has prompted the researcher to assess its impact on the economy. Deficit financing in nigeria, 196570 the journal of. Especially in sri lankan experience there was no research done properly in similar to the dynamic relationship among the budget deficit and economic growth. Keynesian postulation on the efficacy of fiscal deficit being able to stimulate employment and economic growth is premised on his multiplier concept. Financial market development and fiscal deficit financing in nigeria by alenoghena raymond osi department of economics, university of lagos, akoka, lagos, nigeria email. Project information document integrated safeguards data.
It draws on quantitative research methodological framework and specifically employs the ordinary least square regression ols technique to investigate the relationship between gross domestic product, interest rate, domestic debt, budget deficit and domestic credit to. From fy1969 to fy2018, the average net deficit equaled 2. Deficit financing in the process of economic development. Budget deficit financing and the nigeria economy nwaeke. In nigeria, there have been several studies for various time periods on the causes of inflation, for. The necessity for governments to borrow in order to finance deficit budgets has led to the development of external debt. The ardl long run coefficients show that economic growth has a negative significant impact on budget deficit while external debt has a positive significant impact. Both variables deficit financing and economic stability are considered to be very significant for economic growth, but study about their relationship has research gap, as little attention has been paid to the implications of deficit financing on economic stability, particularly in nigeria. The remaining part of the study is organized as follows. As an instrument of recovery after recession, deficit financing can be used to mitigate against severe cyclical fluctuations dewett, 2009. Deficit financing in the process of economic development in nigeria. Pdf deficit financing and the growth of nigeria economy. This study sought to investigate the implications of deficit financing on economic stability in nigeria between 197020. The fact that nigerian economy has experienced some setbacks over the last four decades despite the growth of public expenditure cannot be overemphasized.
With the gdp rebasing in april 2014, nigeria is now also the largest economy in africa. Impact of deficit financing on economic growth in nigeria. Bridging nigerias infrastructure deficit punch newspapers. Financial market development and fiscal deficit financing. The study used secondary time series data for the period 19702014 from economic survey published by kenya national bureau statistics. Deficit finance and the nigeria economic performance. Nnamdi azikiwe university department of banking and finance email. Nigeria has been financing budget deficit overtime but their implications on economic stability have not been fully ascertained. The empirical analysis supported the existence of a significant positive relationship between economic growth and the regressors capital, labour, inflation rate, and trade openness. But any of them did not investigate the dynamic relationship between the budget deficit and economic growth.
Deficit financing in ghana and its impact on the economy. Jan 18, 2020 this implies that deficit financing has had negative impact on ghanas economic growth over the research period. When there is a budget deficit, government finds ways of financing the deficit through borrowing from commercial banks or from nonbanking public and through the issue of short term bonds and monetary instrument. Deficit financing seems to present a negative impact on investment on developing economies especially nigeria. Effects of budget deficit on economic growth in kenya. Section three provides the source and methodology employed in the study. A number of studies have examined the possibility of a relationship between deficit financing and the general price level. On this premises, study conclude that deficit financing is a vital stimuli in promoting economic development in nigeria if adequately channel for the original purpose for which it was meant for. Nwanne 20 investigated the implications of budget deficit financing on economic stability in nigeria between 197020 using the econometric tool of ols. To examine the relationship between government budget deficit financing and economic development. Trend analyses of government expenditure and economic growth in nigeria from 1970 to 2011 42 years, nigeria being a developing economy only recorded fiscal surplus in 1971, 1973, 1974, 1979, 1995 and 1996. This study is on the impact of budget deficit on the nigerian economic growth, 1983 2014. Financial market development and fiscal deficit financing in.