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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:The macroeconomics of fiscal deficits in Nigeria
Authors:Adam, James Akperan
Bankole, Abiodun Surajudeen
Periodical:The Nigerian Journal of Economic and Social Studies
Geographic term:Nigeria
Subjects:national budget
budget deficits
fiscal policy
Abstract:The paper examines the effects and determinants of fiscal deficits in a macroeconomic context in Nigeria using the Two-Stage-Least-Squares (2SLS) method on data for the period 1970-1999. It was found that fiscal deficits and domestic credit have a positive impact on money supply and reliance on the financial market for government financing leads to increases in interest rate. An expansionary fiscal policy will crowd-out investment through interest rate channels. Excess supply of money, apart from raising prices, also puts pressure on the foreign exchange market. Exchange rates are positively related to investment and output. The paper submits that a reduction in federal government presence in the economy, lower interest rates, and increased fiscal decentralization are crucial to deficit reduction and improvement in investment, growth and macroeconomic performance. The paper recommends that government should reduce its deficits and domestic credit to check excess money supply. Similarly, a reduction in fiscal deficits and imports is capable of reducing inflation. The privatization of public enterprises and fiscal decentralization as well as fiscal discipline will help to improve government's fiscal performance. Bibliogr., notes, ref., sum. [Journal abstract]