Fiscal Deficit and Nigeria Economic Growth: An Investigation of Longrun Impact

• Author(s): Eche Nwachukwu Austine ; Pam Bitrus James ; Akeem Adetokun ; Salawu Abdulkamaru
• Paper ID: 1703184
• Page: 312-320
• Published Date: 22-03-2022
• Published In: Iconic Research And Engineering Journals
• Publisher: IRE Journals
• e-ISSN: 2456-8880
• Volume/Issue: Volume 5 Issue 8 February-2022

Abstract

The study examined the impact of fiscal deficit on Nigeria economic growth between 1981 to 2020 through autoregressive distributed lag approach (ARDL). The study used gross domestic product (GDP) as the dependent variable. Government deficit financing (GDF), interest rate (INT) exchange rate (EXR) and inflation rate (INF) as the independent variables. The variables were tested for unit root using augmented dickey-fuller test (ADF). The unit root test showed a mix of integration of order 1(0) and 1(1) which satisfied the condition for the adoption of ARDL model. More so, the cointegration test revealed the presence of long run relationship. As such, the result of the long-run ARDL cointegration revealed (GDF) exert negative impact on (GDP). This shows that a 1% rise in (GDF) depresses (GDP) by 18.6%. more so, INT and EXR also exhibited inverse relationship with (GDP). Only INF was found to exert positive impact on (GDP). As such, based on the finding, the study concluded that fiscal deficit financing (GDF) exerts negative impact on (GDP). Hence, the study recommended that government borrowing should be capital and infrastructural investment focused, that is, such borrowing should be received inform of projects and not liquid cash.

Keywords

Fiscal deficit, economic growth, inflation rate, exchange rate, interest rate

Citations

IRE Journals:
Eche Nwachukwu Austine , Pam Bitrus James , Akeem Adetokun , Salawu Abdulkamaru "Fiscal Deficit and Nigeria Economic Growth: An Investigation of Longrun Impact" Iconic Research And Engineering Journals Volume 5 Issue 8 2022 Page 312-320

IEEE:
Eche Nwachukwu Austine , Pam Bitrus James , Akeem Adetokun , Salawu Abdulkamaru "Fiscal Deficit and Nigeria Economic Growth: An Investigation of Longrun Impact" Iconic Research And Engineering Journals, 5(8)