Deficit financing in nigeria dates back to 1961, and appeared justified during the immediate postindependence era. Evidences from deficit financing in nigeria shows that fiscal operations have been characterized by poor policy implementation, inconsistency of government macroeconomic policy, low growth of private investments, decline in real sector growth, and fiscal indiscipline. Deficit financing in nigeria dates back to 1961, when the first deficit financing exercise. Pdf the study examined the effect of deficit finance on nigeria economic growth.
Effect of external budget deficit financing on economic. It is commonly held that deficit financing may lead to an inflationary rise in prices. Sep 11, 2014 deficit financing and economic growth in nigeria. Investigations show that nigeria was caught in the deficit trap since early 1980s when the world. The expenditure includes disbursement on revenue as well as on capital account. Oyejide 1972 argues that in a less developed country, sustained growth of deficit financing could hardly take place without some amount of.
Solving nigerias 22 million housing deficit with the. Pdf nigeria has been financing budget deficit overtime but their implications on economic stability have not been fully ascertained. Fiscal deficit, financing options and macroeconomic stability. Impact of deficit financing on economic stability in. Project information document integrated safeguards data. A granger causality approach 19862012 to order for a complete project material, pay the sum of n3, 000 to. The study examines empirically the relationship between fiscal deficits and macroeconomic stability in nigeria from. Deficit budget is a famous instrument of fiscal policy used to increase the rate of economic performance of a country.
Bridging nigerias infrastructure deficit punch newspapers. If the usual sources of finance are inadequate for meeting public expenditure, a government may take resort to deficit financing particularly in a developing country like india. Specifically, the study attempts to establish whether there is a significant relationship between fiscal. Solving nigerias 22 million housing deficit with the blockchain. Because of the scale of this deficit, innovative investment solutions are allimportant right now. Effects of budget deficit on economic growth in kenya. When there is a budget deficit, government finds ways of financing the deficit through borrowing from commercial banks or from nonbanking public and through the issue of short term bonds and monetary instrument. The general objective of the study is to analyze the effect of deficit financing on the economy. Financial market development and fiscal deficit financing. From the middle of the 1980s up to the present, the federal government has consistently overspent its actual revenue accruals and have even borrowed in the pursuit of projects for which she has too little revenue backing. Deficit financing in ghana has become an annual phenomenon mainly as a result of the countrys inability to raise enough revenue to finance its budget. Available formats pdf please select a format to send. Deficit financing in nigeria, 196570 volume issue 1 f. Secondary data emanated from the publication of the central bank of nigeria statistical bulletin, vol.
The interest in the level of national debt accumulated by countries has peaked recently due to difficulty in repayment of maturing debt experienced by a number of countries current efforts in. Deficit financing in advanced countries is used to mean an excess of expenditure over revenuethe gap being covered by borrowing from the public by the sale of bonds and by creating new money. Deficit financing refers to the borrowing undertaken by the. Full text views reflects the number of pdf downloads. Deficit financing seems to present a negative impact on investment on developing economies especially nigeria. Deficit as a means of financing was introduced in nigeria after the civil wars, oil crisis and current financial and economic issues. Prior to this time, deficits and its financing were not considered as a major. In order to understand whether or not deficit financing impacts on economic growth. Deficit financing in nigeria, 196570 the journal of modern. This situation has prompted the researcher to assess its impact on the economy. Deficit financing is a recurrent decimal in nigerian economy.
Deficit financing in the process of economic development in nigeria. Impact of deficit financing on economic growth in nigeria. The study revealed that external source of deficit financing exf, nonbanking public. In the last thirty years, deficit financing has become a major impediment to fiscal balance in the administration of public expenditure in nigeria. Deficit financing and its inflationary impact on developing.
This study assessed the effects of deficit financing on trade balance in nigeria from 1980 2008. Analysis from the research indicates that ghanas budget deficit financing and economic growth are negatively correlated. This paper is an attempt to provide empirical evidence on the relationship between deficit financing and selected macroeconomic variables in nigeria. Deficit financing, practice in which a government spends more money than it receives as revenue, the difference being made up by borrowing or minting new funds.
There exist controversies in the literature as to whether budget deficit is inflationary or not. Fiscal deficit, financing options and macroeconomic stability in nigeria. The analysis performed revealed that deficit financing has positive but insignificant effect on nigerian economic growth. Deficit financing in the process of economic development.
Generally, the government uses this source in form of loans from cbk i. The study examined the sources of financing the overall budget deficits and their impact on the selected variables. Jul 31, 2017 in june, the nations 2017 fiscal bill of n7. Fiscal deficit, financing options and macroeconomic.
This study examines the implications of financing fiscal deficit from domestic sources on the. Since 2001, nigerias nonoil economy has grown by more than 8 percent, more than twice the rate of growth over the previous fiveyear period. Budget deficit financing and the nigeria economy nwaeke. The main objective of the study is to empirically examine the effect of deficit financing on nigeria s economic growth. This study sought to investigate the implications of budget deficit financing on economic stability in nigeria between 197020. The study examined the effect of deficit finance on nigeria economic growth. The study utilized data from publications of the central bank of nigeria statistical bulletin between 1981 2012. Deficit financing in ghana and its impact on the economy. However, onuorah and ogbonna, 6 opined that mix match of internal and external debt has led to failure of deficit financing in. From fy1969 to fy2018, the average net deficit equaled 2. Pdf financial market development and fiscal deficit. After payment, text the project topic, your email address and full name to 07035441589.
The main objective of the study is to empirically examine the effect of deficit financing on nigerias economic growth. Since independent, over 85% of nigerian budget are on deficit akinmulegun 1. Nigerias debt market have been more robust and innovative than most and there is no reason to believe it cannot help support the financing needs of government for the successful implementation. This study sought to investigate the implications of budget deficit financing on economic stability in nigeria between 1970. Our shortrun dynamic result indicates a positive relationship between deficit financing and trade balance surplus. An empirical analysis of fiscal deficits and inflation in. Department of economics, abia state university, uturu.
Pdf deficit financing and the growth of nigeria economy. The study utilized data from publications of the central bank of nigeria. This study examines the implications of financing fiscal deficit from domestic sources on the development of the nigerian financial markets. The study recommends that policies that will promote consecutive borrowing in order to reduce the negative effect of external budget deficit financing on the economy should be adopted. This study investigates the implications of financing fiscal deficit from domestic sources on the development of the nigerian financial markets and seeks to establish whether domestic debt crowds out private sector investment in nigeria covering the. What is deficit financingwhen a government spends more than what it currently receives in the form of taxes and fees duringa fiscal year, it runs in to a deficit budget. This study sought to investigate the implications of deficit financing on economic stability in nigeria between 197020. Deficit financing and trade balance in nigeria abstract. Vector autoregressive estimates was used in estimating the model.
Deficit financing in nigeria, 196570 the journal of. Nigerias budget deficit and borrowing strategies the. Public disclosure authorized nigeria developing housing finance. An empirical analysis of fiscal deficits and inflation in nigeria.
When the budget deficit is financed by borrowing from thepublic and banks, it is called deficit financing. Prior to this time, deficits and its financing were not considered as a major threat to monetary management for two reasons. Inflationary effects of budget deficit financing in contemporary economies 79 moreover, inflation as an effect of monetary financing of the budget deficit has a negative impact, as long as its level is high, all the more so, while the real monetary basis decreases, the inflation rate has to be increased in order to finance a given deficit. Public disclosure authorized nigeria developing housing. The housing deficit has been estimated at up to 17 million1, and is growing at about 20 percent a year. Deficit financing refers to the creation of new money for filling up. Financial market development and fiscal deficit financing in nigeria. Deficit financing, inflation and capital formation. In this article we will discuss about the role of deficit financing in developing countries. While taxes and borrowing remain main sources of financing federal and state governments budgets, central government can also use monetary policy borrowing from the banking system as an alternative means to finance its deficit. Since deficit financing increases the total volume of outlay, hence the monetary aggregate demand for existing goods and services rises which poses a potential inflationary gap, causing prices to.
Nov 01, 2012 what is deficit financing when a government spends more than what it currently receives in the form of taxes and fees duringa fiscal year, it runs in to a deficit budget. University department of banking and finance email. Role of deficit financing in developing countries economics. Annual time series data for 44years were collected from central bank of nigeria statistical bulletin, federal office of statistics and world bank handbook of statistics for the period of 197020. The head of the federal mortgage bank in nigeria, ahmed dangiwa, put the countrys present housing deficit at 22 million units. Although budget deficits may occur for numerous reasons, the term usually refers to a conscious attempt to stimulate the economy by lowering tax rates or increasing government expenditures. Nigeria has been financing budget deficit overtime but their implications on economic stability have not been fully ascertained. The study adopted the expost facto research design. Deficit financing is a method of meeting government deficits through the creation of new money. The deficit is the gap caused by the excess of government expenditure over its receipts. Deficit financing in the process of economic development in. However, in nigeria the reverse is the case as the economy has perpetually being at disadvantages in terms of macroeconomic performance, making it a contentious phenomenon.
When there is a budget deficit, government finds ways of financing the deficit through borrowing from commercial and merchant banks or from the nonbanking public and through the issue of shortterm bonds and monetary instruments. Financial market development and fiscal deficit financing in. Anyanwu 1997 shows that budget deficit in developing countries are heavily influenced by the degree of political instability as well as public finance considerations with no apparent direct effect of elections. The study utilized data from publications of the central bank of. The experience of unsustainable deficits in most developing countries like nigeria, leaving heavy debt burden and poor economic performance as well as substantial deterioration in social welfare suggests that financing of budget deficit in nigeria need to be reexamined. The federal republic of nigeria has experienced stable economic growth, averaging 8 percent, over the past decade. In nigeria, fiscal deficits were generally financed from. Aug 05, 2019 bridging nigerias infrastructure deficit.
Another source of deficit financing involves oney printing which entails increasing the m supply of money in the economy by printingmore notes or coins. Furthermore, the result showed that budget deficit affects inflation directly and indirectly through fluctuations in. Over the fy1969fy2018 period, the government generated a surplus on five. Demand for affordable housing in nigeria is large and growing in the face of a sizable deficit and there is a dearth of existing interventions to support closing this gap. A landscape of evolution and innovation, examines the gap in the level of development alongside the huge finance deficit and many other challenges in africas infrastructure. From the literature, it was discovered that deficit financing has become an important tool to correct distortions in an economy if it is put into the most judicious use. Deficit financing seems to present a positive inflationary impact on developing economies particularly nigeria. With the gdp rebasing in april 2014, nigeria is now also the largest economy in africa. While the longterm result posits that an increase in deficit financing diminishes trade deficit in nigeria. Prolong deficit financing have an overall negative impact on the economy by crowding out private investment isah 5. Pdf deficit financing and economic growth in nigeria. The main objective of the study is to empirically examine the.1163 870 1179 382 1484 851 1473 578 1479 755 500 1010 1051 1183 421 56 717 475 1527 624 1465 122 329 1313 493 524 606 103 620 1111 1401 240 1246 1475