IMPACT OF GOVERNMENT BUDGET DEFICIT AND DEBT SERVICING ON ECONOMIC GROWTH IN NIGERIA.

Abstract

The continuous government borrowing is a pointer that the Nigeria’s fiscal foundation is faulty. Thus, this study aims to examine the impact of government budget deficit and debt servicing on economic growth in Nigeria. Time series data was deployed spanning the period from 1981 to 2022 garnered from the Central Bank of Nigeria Statistical Bulletin. The model was specified based on the Keynesian growth model with real GDP as the regressand while government budget deficit and government debt servicing made up the regressors. Utilizing the ARDL estimation technique, the stated hypotheses were tested. The findings revealed among other things that government budget deficit have statistically significant positive impact on the growth of the Nigeria economy in the long-run while government debt servicing has statistically significant negative impact on the growth of the Nigeria economy in the long-run. The study concluded that, in the long run, the growth of the Nigeria economy can be efficiently predicted using government budget deficit and government debt servicing. It recommended that, government should be mindful of borrowing, especially for recurrent expenditure purposes. However, borrowing should be concentrated more on capital expenditures to support development of the agricultural and industrial sectors.  These sectors are germane to sustainable economic growth and development.