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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:Determinants of fiscal deficits in a developing economy: evidence from Nigeria
Author:Egwaikhide, Festus O.ISNI
Year:1991
Periodical:The Nigerian Journal of Economic and Social Studies
Volume:33
Issue:3
Pages:177-189
Language:English
Geographic term:Nigeria
Subjects:budget deficits
taxation
Abstract:Fiscal deficits have been a major feature of Nigeria's growth process and their increase has been due to structural factors. The civil war in the second half of the 1960s gave rise to budget deficits that were partly financed from credit creation. With the oil boom of the 1970s government revenue and expenditure rose phenomenally. As revenue increased, the size of the public sector increased as well, leading to a widening resource gap. The monetization of the petro-dollar to fill the resource gap fuelled the inflationary trend in the economy. With double-digit inflation, the cost of executing government projects escalated and in turn reinforced fiscal deficits. As the domestic rate of inflation exceeded the international rate, the exchange rate appreciated, leading to massive imports. Periodic fluctuations in government revenue and large-scale corruption, as well as the government's huge investment programme, have increased budget deficits. The results of multiple regression analysis indicate, however, that the most important factors determining budget deficits in Nigeria have not been revenue instability and inflation, but increased government participation in the economy and the slow growth of government revenue. The Nigerian case also shows that the financing of fiscal deficits through external loans must be properly managed if a debt crisis is to be avoided. Bibliogr.
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