Impact of Budgetary Deficit on the Nigerian Economic Growth

Abstract

Given the importance of budgetary provisions to developing economies such as Nigeria, the twin subject of budgetary provisions and economic growth has remained a focal point for discussion in recent times. By means of an exploratory research design, this study examines the Impact of Budgetary Deficit on the Nigerian Economic Growth. Findings from the study reveal that, there is significant positive correlation between deficit financing and economic growth in Nigeria. The study therefore concludes that deficit financing has positive impact on economic performance of Nigeria, as it clearly shows that financing activities affects economic growth positively. Furthermore, inflation has been established as monetary phenomenon in Nigerian economies; and also for budget deficit to be effective, some fundamental changes in the productive base of the economy need be made. Based on the findings of the study, it is recommended that government should pursue policies capable of reducing in the size of informal sector which has imposed greater constraint to revenue collection and generation. Also, interest rate should be further reduced to enable availability and accessibility of funds for private sector investment which will contribute significantly to economic growth of the Nigeria. Furthermore, exchange rate depreciation should be discouraged in the economy as it has negative implication to the economic growth.