Deficit Financing in the Process of Economic Development in Nigeria
Journal Title: Saudi Journal of Business and Management Studies - Year 2017, Vol 2, Issue 3
Abstract
Abstract: These empirical research works is anchored on the three fundamental and theoretical arguments that emanated between the Keynesian school, the neoclassical school of thought and Ricardo hypothesis and their view on deficit financing with respect to its contribution to economic development. Despite the huge quantum of debt Nigerian government accommodate yearly, the expected level of development is not been attained as larger percentage of her citizens still lives in abject poverty, low standard of living and high level of unemployment and so on. At this junction, one begins to wonder why the theoretical suggestion dose not seems to be working in the Nigerian context. It is based on these hullabaloos that this study seeks to investigate the effect of deficit financing on development of the Nigerian economy between the periods 1981 to 2015 using error correction model and granger causality test. Study report that Federal government external debt exhibits 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 development in Nigeria to the tune of 0.00003. The report of the causality test also validate the report in the error correction model and thus suggest that external debt significantly contribute to the development of the Nigeria economy while domestic debt and deficit budget does not seems to granger cause economic development in Nigeria. On this premises, study conclude that deficit financing is a vital stimuli in promoting economic development in Nigeria if adequately channel for the original purpose for which it was meant for. Furthermore, study thus validates the Keynesian postulation of the existence of positive relationship between deficit financing and economic development. On this note, study recommend that managers of the Nigerian economy should coordinate the appropriation of borrowed fund and ensure that it is properly channelled towards improving the capital and production dominance of the nation as this will further help in achieving a sustainable level of economic development in Nigeria. Keywords: Economic Development, Granger Causality, Deficit Financing
Authors and Affiliations
Monogbe Tunde G, Okah O. John
Keywords
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