GOVERNMENT BUDGET DEFICIT AND ECONOMIC PERFORMANCE IN NIGERIA (1981-2019)

Abstract

The study analyses the economic performance of Nigeria from 1981 to 2019 as a result of the government budget deficit. The analysis included the independent variables bank rate, broad money supply, inflation rate, foreign direct investment and exchange rate, while GDP per capita income, employment rate and price stability measured economic performance. The study made use of annual time series secondary data, the obtained data were analyzed using tables, and econometric approaches, namely the Autoregressive Distributed Lag (ARDL) model. The unit root test, utilizing both the Augmented Dickey-Fuller (ADF) test and the Philip-Perron (PP) test, the lag order of the ARDL models using VAR lag order selection criteria, and the bound test were all conducted. From the foregoing statistical output, findings established that budget deficit insignificantly stimulate economic performance. Unfortunately, Nigeria’s budget deficits, money supply, do not generate growth that increases employment. The findings, however, demonstrates that the bank rates all contribute to price instability, but the outcome of the bank rate is the inverse. Before reaching conclusions, the study recommended that policymakers guarantee appropriate use of borrowed money and keep a sporadic assessment and monitoring of the borrowed funds project to produce lucrative returns that would assist in service and boost economic performance. The Government should develop policies that examine the channels of government spending to determine why the massive investment has not resulted in a viable economic performance in terms of price stability and growth that ensures job creation.