NWANI, Onyemaechi Christopher
Department of Banking and Finance
Federal University Wukari, PMB 1020 Wukari
Taraba State, Nigeria.
nwani@fuwukari.edu.ng/08030649425
ADUKWU Precious
Department of Banking and Finance
Federal University Wukari, PMB 1020 Wukari
Taraba State, Nigeria.
Preciousehi970@gmail.com/08065228897
ABSTRACT
This study examined the effects of deficit financing on economic development in Nigeria (2003-2021). The
specific objectives were; to ascertain the effect of budget deficit on economic development in Nigeria, to
determine the effect of domestic borrowing on economic development in Nigeria and lastly to evaluate the
effect of external borrowing on economic development in Nigeria. The study adopted Ex-post facto research
design with yearly time series data obtained from publications of the United Nations Development
Programme (UNDP) and the Central Bank of Nigeria Statistical Bulletin. A computer based multiple
regression equation using autoregressive distributed lag (ARDL) method of estimation and other descriptive
statistics techniques were employed to determine the relationship between the variables in the study. The
findings from the study revealed that budget deficit and domestic borrowing had significant positive effect
on economic development in Nigeria whereas external borrowing had weak effect on economic development
in Nigeria. Consequently, the study recommended among others that there must be genuine commitment in
executing budgets and also the need for adequate monitoring so that budgetary allocations can result in
actual development across all the targeted sectors. The study therefore concludes that deficit financing is a
major driver of economic development in Nigeria and that financing the deficit through domestic borrowing
is also an important contributor to development in Nigeria.
Keywords: Deficit financing, budget deficit, domestic borrowing, external borrowing, economic
development