ANALYSIS OF THE IMPACT OF BUDGET DEFICIT ON ECONOMIC GROWTH IN NIGERIA

Government, whether military or civilian believe that one way of solving social problems is by increasing government spending. In the process of discharging this enormous responsibility, the revenue and spending requirements of the government may sometimes outstrips its availability, hence the recourse to deficit financing so as to fill the gap between expenditure needs and revenue availability. This study was aimed at assessing the impact of budget deficit on economic growth in Nigeria. The research design employed in this research is descriptive statistics method with a P value <0.05 at 5% level of significant. The main analytical tool is an autoregressive distributive lag (ARDL) model which deals with single co-integration and it is introduced originally by Pasaran and Shin (1999) and further extended by Pesaran et al (2001). Theoretically, this study therefore relied on Keynesian’s theory. Results from this study reveals that the mean values of all the variables are positive and GDP has the highest average value of 286618.9 followed by TAX REV with the value of 3269.880. DEBT, BUDGET DEFICIT, TAX REV and EXCHANGE RATE have unit root at level and became stationary after first difference I (I) while GDP, INF and Interest Rate are stationary at level I (0) by comparing the ADF value with their respective critical value at 5% level of significant. The F-statistic value of 2.10 is less than the critical value of the lower bounds of 3.23, which implies that there is no existence of long run relationship. Consequently, the ARDL estimates showed that Debt, Budget Deficit and Tax Revenue can significantly impact on GDP in Nigeria. Findings from the study conclude that GDP respond to debt, budget deficit and tax revenue in Nigeria.