Authors:
Odinaka Princewill Chukwunyere, Amarilys González García, Marcus Antonio Assis Lima, A. Anithalakshmi

Addresses:
Department of Economics and Social Sciences, Ignatius Ajuru University of Education, Port Harcourt, Rivers State, Nigeria. Department of Research and Development, Placental Histotherapy Center, Havana, Cuba. Philosophy and Human Science Department, State University of Southwest Bahia, Bahia State, Brazil. Department of Science and Humanities, Dhaanish Ahmed College of Engineering, Chennai, Tamil Nadu, India. princewillody@gmail.com, gonzalezgarciaamarilys@gmail.com, malima@uesb.edu.br, anithalakshmi@dhaanishcollege.in

Abstract:

This paper examines the effect of deficit financing on Nigeria’s economic growth. A descriptive and analytical design was used in the paper. The following methods were employed: the ARDL for regression analysis, the Bound test co-integration technique to confirm the long-run relationship among variables, the ADF unit root test to ascertain the stationarity properties of the variables to hedge against spurious regression, and the Error Correction test to test the short-run dynamics. The dependent variable is RGDP, while the independent variables are the following: exchange rate, external reserves, domestic debt financing, and foreign debt financing. The study found that there is no correlation between the exchange rate and GDP growth in Nigeria, and the same holds true for foreign loan financing. Foreign reserves and domestic debt financing, on the other hand, significantly impact GDP growth. As a result of the country's inconsistent application, the research found that domestic debt financing and external reserves had an unstable (asymmetrical) impact on the economy. We propose that the national debt be invested in growth-promoting economic initiatives. To prevent the flight of capital, it is important to keep an eye on how domestic debt is being used. Foreign debt funding should be discontinued by the government as it has no impact on the economy. Since external reserves are the primary means of funding developmental programs and, in most circumstances, deficits, it is important to have a strategy to build them.  

Keywords: Augmented Dickey-Fuller (ADF); Foreign Debt; Domestic Debt; Real Gross Domestic Product (RGDP); External Reserves; Economic Growth; Inflationary Pressure; Foreign Debt; Auto-Regressive Distributive Lag (ARDL).

Received on: 05/01/2024, Revised on: 02/03/2024, Accepted on: 04/05/2024, Published on: 03/06/2024

DOI: 10.69888/FTSML.2024.000238

FMDB Transactions on Sustainable Management Letters, 2024 Vol. 2 No. 2, Pages: 91-102

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