THE NEXUS BETWEEN DEFICIT FINANCING AND ECONOMIC GROWTH IN NIGERIA: EVIDENCE FROM THE ECM APPROACH

The study investigated the relationship between deficit financing and economic development in Nigeria from 1980 -2024. The estimated from the co-integration test indicated that all the variables are integrated of order 1(0) fostering the need to conduct or apply the error correction mechanism to found if there is a short run relationship among then variables under investigation. The variables used are economic development proxy like human development index (HDI), broad money supply (BMS), deficit budget (BGD), domestic debt (DMD and external debt (EXD). Results showed that there is a long equilibrium among the variables with a speed of adjustment from its long run equilibrium to its short run equilibrium within the review period. The study concludes that running a budget deficit to a large extent controls the excesses of government spending due to the negative relations with human development index and finally the study recommends a comprehensive approach towards its fiscal spending in areas such as her domestic and external debts as it affects the economic wellbeing of Nigeria..