Budget Deficit, Budget Reform and Economic Growth in Nigeria

This study examine the impact of budget reforms and budget deficits on economic growth in Nigeria from 1981 to 2023.The study adopted the Vector error correction model to analyze the time series data. Findings from the Vector error correction model analysis revealed that budget deficit, budget reform has a significant impact on the economic growth of Nigeria. Based on the findings from the study, the study recommends that for improved economic growth, budget reform policies should be such that they ensure linkages of government expenditures ceilings to government revenue, external debt to current account balances and public debt to budget balances. On this basis IMF benchmarks for liquidity, solvency and stationarity can be met. Furthermore, the positive impact of budget deficit and budget reform on economic growth calls for more budget policy reforms that will encourage increase funding to sectors like education and health. These sectors enable growth in any economy. In the same manner, the share of capital expenditure to recurrent expenditure should be such that meets quick acid test ratio like in the 18 years of the study period. Increase government spending especially in budgetary allocation to capital expenditure in areas like education, health, power and housing. Budget reform policies like UBE Act 2003, TETF 2013 should be encouraged. It enhances sectoral allocation efficiency and stimulates economic growth in Nigeria.