The Economic Performance of Budget Deficit in Nigeria

Abstract

This study examines the impact of budget deficit on economic performance in Nigeria between 1970 and 2013. The study incorporated bank rate, broad money supply, external reserves and fiscal balance as the independent variables, while, economic performance is measured by per capita income, unemployment rate and price stability. Using the least square method, the results revealed that both budget deficits and external reserves have positive and significant impact on capita income, whereas bank rate and money supply have indirect and insignificant on the same per capita income. Unfortunately, budget deficits, money supply and external reserves doesn’t creates growth that enhance employment rate in Nigeria. However, the result shows that bank rate reduces unemployment rate. Similarly, budget deficits, money supply and bank rate cause price instability but the result of bank rate reports the opposite. The government should formulate policy that would check the channels of government expenditure in order to find out why the huge spending has not translated into a viable economic performance in terms of price stability and growth that guarantees employment creation.

Keywords: Fiscal balance, per capita income, unemployment rate, price stability, Nigeria.