Management of Federal Government Fiscal Deficit as a correlate to Internal Debt and Managing Domestic Debts in Nigeria: An Empirical Evidence

The chief aim of the study is to examine the Management of Federal Government Fiscal Deficit as a correlate to Internal Debt and Managing Domestic Debts in Nigeria. A model was formulated. The co-integration technique was used for the empirical analysis. The technique is made up of Ordinary Least Square (OLS) regression, and the Unit Root Test (URT). The results of the study confirmed that budget deficit is the main determinant of domestic debt in Nigeria, that inflation rate has a divergent significant impact on domestic debt in Nigeria, that government consumption spending has only a long run impact on domestic debt in Nigeria, that interest rate on government debt instruments has a long run and not a short run effect on domestic debt accumulation in Nigeria. It is therefore recommended that government must endeavour to implement the fiscal responsibility Act of limiting the level or domestic debt to 3 percent of GDP, as this action, it is hoped will serve to discipline the government in carrying out its fiscal responsibility. In addition, current effort at mobilizing resources through the capital market by issuing bonds should be intensified so that government can achieve the twin objectives of financing her programmes while at the same time helping to achieve sustainable level of domestic debt. Besides, the time perspective of government spending and interest rate on debt instruments should be a stronger factor in the negotiation of domestic debt in Nigeria. There is also the need to obtain loans that are channelled in such a way as to increase the productive capacity of the economy, in order to enhance easy repayment and promote economic development.