IMPACT OF BUDGET DEFICIT ON ECONOMIC GROWTH IN NIGERIA, (1981-2015)

ABSTRACT

The study on the impact of budget deficit on economic growth in Nigeria employed time series data within the period of 34 years (1981-2015). The data was sourced from central Bank of Nigeria (CBN), National Bureau of statistics (NBS) and World Bank: World Development indicators. The series was subjected to unit root test of both ADF and PP test and was found stationary, some at level and others at first difference. The researcher further tested for short run and long run relationship among the variables using the ARDL model to test for cointegration and Granger Causality test was also conducted in order to ascertain whether budget deficit granger cause economic growth. The obtained results show a significant but negative relationship between government budget deficit and economic growth in both the short run and long run analysis. Also, the obtained result from the Granger test indicates that budget deficit does not granger cause economic growth. The study therefore recommends that government reduce or completely discourage budget deficit.