Fiscal Deficit and Macroeconomic Performance in Nigeria

Abstract

This study assessed the impact of fiscal deficit on key measures of macroeconomic performance in Nigeria. Specifically, it examined the impact of fiscal deficit on unemployment rate, and GDP growth rate. The study used time series annual data from 1991 to 2022 collected from Central Bank of Nigeria statistical bulletin and World Bank development indicators. With the aid of the ARDL techniques the objectives of the study was achieved. Findings revealed that there was a long run relationship between fiscal deficit and measures of macroeconomic performance. The ARDL result indicates that Fiscal Deficit (FD) had positive and significant effect on economic growth in both the long and short run. Fiscal deficit was, however, negatively related to unemployment rate.  Fiscal Deficit (FD) had negative and significant impact on unemployment rate in the long run, but had no significant impact in the short run. The study, therefore, indicates that over the reviewed period, expansionary budgetary pursuits of the Nigerian government through Fiscal Deficit financing translated to economic growth and reduced unemployment rate. Therefore, it is recommended that fiscal deficit policy could be pursued by government provided that public funds are continuously channeled towards expenditures that support sustained economic growth and reduced unemployment.