EFFECT OF FISCAL DEFICIT FINANCING ON NIGERIA’S ECONOMIC GROWTH (1980-2018)

For several years in the past, the Nigerian economy was characterized by a high level of external and internal debts. Contrary to expectations, the country’s economy grew sluggishly. This necessitated the re- examination of the effect of fiscal deficit financing on the economic growth of Nigeria. The study period covers from 1980 to 2018. Specifically, the study sought to ascertain the effects of domestic borrowing, external borrowing, way and means and the use of foreign reserves on the real gross domestic product of Nigeria. The research employed the ex - post facto research design and utilized secondary data sourced from Central Bank of Nigeria’s statistical bulletins of the relevant years. The empirical results showed that internal borrowing has positive and significant effect on real GDP, external borrowing has negative and non-significant effect on real GDP, the way and means has positive and non-significant effect on real GDP while external reserve has negative and significant effect on real GDP. This weak response can be
tied to corrupt practices and the low infrastructural development in Nigeria. Aligning this finding to the situation at hand, the conclusion is that the Nigerian economy has been characterized by continuous fiscal deficits that have not positively contributed to economic growth. The study recommends that, while providing for a sound borrowing program, the federal government should spend borrowed funds on projects that have the capacity to create high returns in the future. Future studies can be focused on ascertaining how the established relationships can be complemented with other policy variables in order to bring about some positive results on economic growth.