Fiscal Deficit and Its Impact on Nigeria’s Economy

The idea that deficit spending can help promote advanced growth, enable higher tax revenues to be generated and thus reduce the fiscal deficit over time has been area of interest. This research provides an empirical analysis of how fiscal deficits influence economic expansion within the Nigerian context. Utilizing an ex-post facto research framework, the study examines secondary data spanning the years 1990 to 2024, gotten from Central Bank of Nigeria Statistical Bulletin. To investigate the relationship between fiscal deficit indicators and national economic performance, the Fully Modified Ordinary Least Squares (FMOLS) estimation technique was employed. The analytical results indicate that the Government Budget Deficit (GBD) has a statistically significant and positive influence on Nigerias economic output, based on probability results at a 5% significance level. Conversely, the findings suggest that Public Debt (PUD) does not exert a significant impact on the countrys economic performance, with probability outcomes falling outside the 5% significance threshold. Based on these results, the paper recommends that the Federal Government implement strategic measures to refine budget deficit policies, ensuring more effective execution and resource utilization. Furthermore, it is advised that the government establish robust monitoring mechanisms to ensure public borrowing is strictly channelled toward productive economic activities. Such a shift would help protect and stimulate both private investment and the broader real sector of the Nigerian economy.