SUMMARY, CONCLUSION AND RECOMMENDATION OF BUDGET DEFICIT IN NIGERIA WITH REFERENCE / BIBLIOGRAPHY



SUMMARY OF FINDINGS
            What relationship should we expect to find between budget deficit and economic growth in Nigeria? Because budget deficit entails spending more income than that received by the government in order to achieve economic growth in Nigeria, increase in Real Gross Domestic Product should be associated with increase in budget deficit if the expenditure is not controlled in the fiscal manner. The positive relationship between RGDP and budget deficit is justified by the argument of the Keynesian economist. However, this positive relationship is temporal though it shows a statistically significant effect on the level of budget deficit incurred.
            It was discovered that there are other macroeconomic indicators which greatly influence budget deficit in Nigeria. They are Real Exchange Rate, Federal Government Capital Expenditure and Current Account Deficits. Real gross domestic product was also discovered to have strong statistical
relationship with budget deficit in Nigeria. Real gross domestic and current Account Deficits were found to be positively related to budget deficit in Nigeria, whereas, real exchange rate, federal government capital expenditure and real interest rate were found to be negatively related with budget deficit in Nigeria. However, the entire explanatory variables, is statistical significant which means that 1% increase in RGD, FGCE, RER and RIR will lead to 1% increase in budget deficit.



RECOMMENDATIONS
            This study recommends that the relationship between budget deficit and economic growth in Nigeria implies that though the two variables are positively related, active government policy should be used to ensure that budget deficit does not exceed it maximum limit. In order to keep budget deficit at a minimal level, means of generating national revenue should be directed towards achieving the given target while the ways by which federal government capital expenditure is generated are checked.
            Prior to recommending some necessary policy thrust, it will be important for the researcher to outline a summary of the factors influencing or determining budget deficit in Nigeria. They include:
  • Current account deficit
  • Real exchange rate
  • Real interest rate
  • Federal government capital expenditure
  • National savings
  • Money supply
  • Inflation
Given the factors enumerated above, the researcher therefore recommends the following: government should check the level of deficit for effective control of current account deficit in Nigeria. The need arises because as budget deficit increases, current account deficit increases which negatively affect economic growth.
            As a matter of urgency, government should adopt fiscal management actions that will aim at reducing fiscal deficits that often result in large chunk of transfer payment and extra budgetary expenses.
            Government should adopt fiscal adjustment mechanism that increases revenue through improved taxes rather than borrowing to finance deficit and over-dependence on crude oil.
            There is need to check the growth of federal government capital expenditure because of its likely contractionary impact on economic growth.
            The growth of Nigerian economy largely depends on ensuring that the relationship between budget deficit and economic growth are maintained at this given level. Measures should be taken to ensure that adverse effects of budget deficit in Nigeria are eliminated.         Budget deficit financed principally through the central bank and external debt with high service rate should be discouraged.
            Government should adopt adequate exchange rate policies to ensure that even when these deficits are being paid for, the exchange rate for our domestic currency will not be affected.
  
CONCLUSION
            There is need to emphasize that in Nigeria, we are not insisting that the government should not be financed from the CBN resources because this in itself is inflationary. Although fiscal deficits can also be financed through external borrowing, it may also lead to inflation.
            The direction of deficits spending in Nigeria has been on unproductive transfer payment and extra budgeting expenses of questionable dimension. This results in deficit trap. As a result, deficit spending which goes against achieving the stated goals should be discouraged.
            There are other important factors that need to be rightly considered in achieving faster economic growth even in the face of budget trade, coordination of monetary and fiscal policies, a sustained effort to enhance private savings, measures focusing on efficiency improvement as well as the exchange rates, which will complement the budget cut policy.
            The Nigerian economy should create conducive economic conditions such as creating avenues of returning to other sectors that has been neglected. This will help the government to reduce fiscal deficit through reduction of extra budgetary expenses on wasteful federal government public expenditure.
            Finally, economist and policy makers should not focus on the level of budget deficit but on the source of financing it to ensure that economic growth in Nigeria is not retarded.


BIBLIOGRAPHY OR REFERENCE
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