IMPLICATIONS OF PUBLIC SECTOR BUDGET DEFICIT FINANCING ON ECONOMIC GROWTH IN NIGERIA: 2003-2018

Abstract

This term paper titled: “Implications of public sector budget deficit financing on Economic growth in Nigeria” was carried out with the intention of ascertaining which financial options out of many financial alternative is the best for the Nigerian government. The research work gave considerations to the cost and risk associated to each finance option over the period 2003-2018.After review of several literatures and appropriate theories, the empirical analysis was carried out. The work employed regression analysis using log-linear of real GDP as the dependent variable and explanatory variables (Bank credit to government- BCG, Non-bank public credit - NBP, ways and means - WM, and external deficit financing - EXDF). The result revealed that budget financing through bank credit and Non-bank public are positively proportional to the growth rate of Nigerian economy. It further showed that financing through ways and means is inversely related to real GDP growth. The result for external financing exhibited inverse relationship with the growth rate of Nigerian economy but the coefficient of EXDF was not statistically significant. It was recommended that government should weigh the risks associated with external borrowing as well as consider the medium and long-term repercussions of a possible default on debt servicing.