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Persistence of fiscal deficits in Nigeria: examining the issues

Okoye, Lawrence U. and Omankhanlen, A. E and Okorie, Uchechukwu Emenas and OKOH, JOHNSON IFEANYI and Ahmed, Ado (2019) Persistence of fiscal deficits in Nigeria: examining the issues. Investment Management and Financial Innovations, 16 (4). pp. 98-109.

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Due to a huge financing gap in many developing nations, governments use budget deficit to facilitate growth and development. However, deficit financing deepens the economic woes of these economies, leaving them in a vicious cycle of deficits. In Nigeria, for instance, fiscal deficits cause country’s bad performance and ranking both in global growth and development indicators. Thus, the use of fiscal deficit to enhance economic performance has proved to be futile and also has left bad economic consequences. Based on the econometric method of Autoregressive Distributed Lag, this study examines how selected macroeconomic indicators influence fiscal deficits in the budgetary policy of Nigeria. Historical data between 1981 and 2017 were used for the study. The study shows a significant positive effect of inflation, oil revenue, and lagged exchange rate on fiscal deficits. There is also evidence that external debt and current exchange rate decrease the level of fiscal deficits. However, the research did not prove robust evidence of fiscal deficit persistence. Government policy should target low level of inflation and exchange rate appreciation as well as the productive investment of oil revenues and economic diversification as the panacea for persistent use of fiscal deficits.

Item Type: Article
Uncontrolled Keywords: public finance, government expenditure, fiscal operations, economic growth
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HG Finance
Divisions: Faculty of Law, Arts and Social Sciences > School of Management
Faculty of Law, Arts and Social Sciences > School of Social Sciences
Depositing User: Mrs Patricia Nwokealisi
Date Deposited: 30 Jan 2020 12:03
Last Modified: 30 Jan 2020 12:03

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