DEFICIT FINANCING AND ECONOMIC RECOVERY

Ifeoma Maria Ihegboro,Okereke Lawrence Okoronkwo,Nnenna Georgina Nwonye,Ebele Cecilia Igwemeka,Collins Chimkamma Chinda,Onodugo Ifeoma

doi:10.46827/ejefr.v5i3.1178

Ifeoma Maria Ihegboro, Okereke Lawrence Okoronkwo + Show 4 more

Open Access

https://doi.org/10.46827/ejefr.v5i3.1178

Copy DOI

Abstract

Regardless of the vast amount of debt Nigerian government accommodate annually, the projected level of development is not realized as sizeable percentage of her citizens still lives in miserable poverty, low standard of living and soaring level of unemployment and so on. Consequently, one starts to question why the theoretical proposition seems not to be working in the Nigerian perspective. It is based on these commotions that this research work seeks to scrutinize the effect of deficit financing on recovery and development of the Nigerian economy between the periods 1981 to 2015 employing error correction model and granger causality test. Study exposes that Federal Government external debt displays a significant P-value of 0.0173 with a positive coefficient of 0.000031 signifying that 1% increase in government external debt is capable of intensifying economic recovery and development in Nigeria to the tune of 0.00003. The details of the causality test also corroborate the report in the error correction model and thus advocate that external debt extensively adds to the development of the Nigeria economy while domestic debt and deficit budget does not give the impression to granger cause economic development in Nigeria. On this basis, study affirms that deficit financing is a crucial incentive in advancing economic development in Nigeria if effectively disbursed for the primary rationale for which it was meant for. Additionally, study thus authenticates the Keynesian theory of the existence of positive relationship between deficit financing and economic recovery. On this note, study recommends that executives of the Nigerian economy should harmonize the appropriation of borrowed fund and make certain that it is well utilized towards improving the capital and production dominance of the nation as this will further boost the realization of accomplishing a sustainable level of economic development in Nigeria.  Article visualizations:<img src="/-counters-/edu_01/0975/a.php" alt="Hit counter" />

Highlights

In ongoing time concerns have been raised by specialists over the nation's expanding obligation stock even as the Federal Government means to fund the 2021 financial plan deficit with N4.28tn new acquiring which is around 33% of the N13.59tn spending plan (DMO, 2021)
The question arose that why the inverse relationship between the empirical report and practical experience? Historically, Nigerian economy has been undergoing series of economic development stages overtime but inequalities in income distribution has widened the gap between the few rich and the much poor and has such, this makes the projected development a mirage
Federal government external debt reveals a significant P-value of 0.0173 with a positive coefficient of 0.000031 suggesting that 1% increase in government external debt is capable of stimulating economic recovery and development in Nigeria to the tune of 0.00003

Summary

Introduction

In ongoing time concerns have been raised by specialists over the nation's expanding obligation stock even as the Federal Government means to fund the 2021 financial plan deficit with N4.28tn new acquiring which is around 33% of the N13.59tn spending plan (DMO, 2021). The Keynesian way of thinking advances the development in government consumptions even above current pay In their view, the real reason for misery is insufficient spending by the public area when the economy experiences absence of total interest, for example, the economic crisis of the early 20s of 1929 to 1932 and most as of late, the 2008 Global Financial and Economic dissolve down. The real reason for misery is insufficient spending by the public area when the economy experiences absence of total interest, for example, the economic crisis of the early 20s of 1929 to 1932 and most as of late, the 2008 Global Financial and Economic dissolve down This will support the interest for useful yield and to bring down the spate of unemployment (Anyanwu and Oaikhenan, 1995; Ogboru, 2006; Iya, 2014). The other piece of the use which has not been financed through personal expense, person's reserve funds or homegrown acquiring should be through financial deficit

Literature Review

Methodology

Results and Discussion

Conclusion and Recommendations