NEXUS OF FISCAL DEFICIT AND ECONOMIC GROWTH IN NIGERIA

Abstract: The aim of the study was to determine the relationship between budget deficit andeconomic growth in Nigeria was examined using data derived from Central bank of Nigeriaannual bulletin and world bank website. Data used for the study were annual data covering theperiod of 1970 to 2024. The study examined the relationship using multiple regression andautoregressive distributed lag whilst various diagnostics and post estimation analysis weremade. The outcome of the study confirmed that budget deficit have positive effect on real GDPand hence significantly improve economic growth in Nigeria. Based on findings the studyrecommends that the efficiency of public spending needs to enhanced in Nigeria. This involvesa more efficient allocation of deficit spending among optimal sectors in the economy. Theextensive effect of budget deficits on the economy also requires that fiscal sustainability beensured over time in Nigeria. The medium-term fiscal framework that forms the foundations ofnational budget need to be fully implemented in each budget cycle. Regular fiscal audits andtransparent budgeting can ensure deficits remain sustainable while delivering economicbenefits. The study further recommends that to optimize economic growth, policymakers needto strategically use fiscal deficits to boost GDP.