Effect of Budget Deficit Financing on the Development of the Nigerian Economy: 1980-2008

C. M. Ojong, Hycenth O. Owui, Charles Effiong


The main objective of this study was to investigate the influence of government budget deficit financing on economic development in Nigeria. Six research hypotheses were formulated to evaluate the relationship between government budget deficit financing, unemployment, inflation, BOP, government financing, and government revenue as the independent variables and GDP as the dependent variable. Secondary data was collected from CBN statistical bulletin. Ordinary least square regression technique was used to estimate equations formulated for the study. Results of the findings revealed that: there exists a significant relationship between budget deficit financing and economic growth in Nigeria. An inverse relationship existed between GDP and unemployment in Nigeria, a direct relationship was observed between GDP and inflation in Nigeria. The findings also show that there existed a significant relationship between GDP and government expenditure and an inverse relationship was observed between government revenue and GDP. It was recommended that government should be accountable to the electorates by forestalling transparency in the preparation & implementation of budgets. Thus, a system of sound internal control mechanism should be put in place to facilitate early detection of fraud in the budgetary process. Those indicted in the process should equally be brought to book promptly by the law enforcement agencies like the Economic & Financial Crime Commission (EFCC), Independent Corrupt Practices Commission (ICPC), the police, etc. The significant figure showing deficit shows that most times, fiscal authorities’ under-estimate the cost of items in the budget. Excessive deficit spending is occasioned by inappropriate planning and evaluation caused by the inexperience of economic planners. Also, government attitude of lack of transparency could be a major cause. Hence, the government should exhibit a high degree of transparency in governance so as to bring to the barest minimum deficit financing.

Keywords: Balance of payment, Government budget deficit financing, Government expenditure, Government                      tax revenue, Gross domestic product, Inflation, Unemployment

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ISSN (Paper)2222-1905 ISSN (Online)2222-2839

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