An Assessment of Budget Deficit Financing and Nigeria’s External Sector Performance (1990-2017)

This paper assessed Budget Deficit Financing and Nigeria’s External Sector Performance (1990-2017); the general objective of the study is to assess Budget Deficit Financing of Nigeria in the context of her performance in the External Sector while the specific objective is tied to evaluatingthe implications of Budget Deficit Financing on Nigeria’s Net Trade and Foreign Direct Investment. The ADF unit root test and the Autoregressive Distributed Lag (ARDL) models were used as the estimation techniques of the data analysis. The findings of thestudy showed that 78% of the total variation in Nigerian Net Trade (NT) resulted from the explanatory variables (DFB and FDI) included in the model and conclude that: Budget Deficit Financing (DBF) has insignificant positive impact on the Nigerian External Sector Performance during the period reviewed, and that, FDI’s impact is significant and positive on the Nigeria’s External Sector Performance during the period reviewed. Hence, we recommend that government should focus on fiscal and monetary policies that will enshrine fiscal discipline for at levels of government and its agencies.

Nigeria and recommends that by effectively managing the money stock, monetary policy and instrument improve and be strengthened. According to (Momodu & Monegbe, 2017), they examined the relationship Budget Deficit Financing and Economic Development using Vector Autoregressive estimation from 1981 to 2015 and found out that Budget Deficit Financing significantly affects Economic Growth and recommends effective use of borrowed funds to achieve sustainable growth. Fagbohun (2017), examined Nigeria's Budget Deficit Finance and Economic Performance in Nigeria , using proxies like money supply, bank rate external reserve and fiscal balance as the independent variable (IV) while per capita income, price stability and unemployment are used to project Economic Performance which is the dependent variable (DV). Using least square method, they discovered that the relationship between Nigeria's Budget Deficit Financing is significant and positive and recommends that the government should bring on measures that would curtail waste when expending borrowed funds. Ehinomen & Ugwu (2017), using VAR and Johansen Cointegration Test, relationship between Budget Deficit Financing, Inflation and Money Supply in Growth in Nigeria was empirically examined and the interplay amongst these parameters suggest Budget Deficit Financing as a viable option for growth especially during recession and prove wrong the view that Budget deficit Financing engenders inflation and posit further that this would only happen if it is not properly managed.

Introduction:
It describes, to significant users, how hypotheses were tested and the basis for which conclusions were drawn. This research work borders on the Implication of Budget Deficit Financing on Nigeria's External Sector Performance.

Research Design:
The data used are secondary data. This method of data collection was determined by factors such as the research topic and purpose.

Population of the Study:
The population of this study is based on the Budget Deficit Finance Aggregates, Net Trade and Foreign Direct Investment estimates of Nigeria.

Sample Size and Sampling Techniques:
Twenty eight (28) years (1990 -2017). Stratified sampling technique was adopted; the variables that are stationery at first difference were sampled in this research effort.

Source and Method of Data Collection:
All data used in the analysis are from secondary source gathered from The Central Bank of Nigeria Statistical Bulletin (2017).

Technique and Instruments of Data Analysis:
The Technique and Instrument of Data Analysis is informed by the peculiarity of the data set, as such, this study adopted the Unit Root Test, Autoregressive distributed Lag (ARDL), and Bound Testing procedure was chosen over other approaches to co-integration due to the fact that it does not require cointegration of the same order. The bounds testing approach is suitable for small or finite sampling data unlike other conventional co-integration approach. Its suitability for small sample study is worth noting given that the sample period of this study is limited (28 years). The dependent variable of this study that is, external sector performance (XSP). It would be measured by fiscal deficit (DBF), Net Trade (NT), and Foreign Direct Investment (FDI) of the reporting country. The table above shows that at 5% level the time series data were stationary. Note also that since, all the time series data in this study are stationary in the long run. The, A.R.D.L. was employed in analyzing the set of data of the research. The ARDL analysis result is presented in Table 4.2.

FINDINGS AND DISCUSSION:
Autoregressive Distributed Lag (ARDL) Model: The estimated ARDL model above establishes that the coefficient of determination (R 2 ) of 0.779564 reveals that 78% of the total variation in Nigerian net trade (NT) resulted from the explanatory variables (DFB and FDI) included in the model while the remaining 22 percent is explained by other variables that influence Nigerian net trade (NT) which were excluded from the model but were however, taken into consideration in the error term. F-stat of 3.857958 and prob. (F-Statistics) of 0.01428< 0.05 which proved significant at 5%. There was no indication of serial correlation (i.e. autocorrelation) as shown by the DWstat. (Durbin Watson) of 2.507786. Similarly, the 1 st and 2 nd lag length periods of the coefficient of NT shows that the coefficient of NT is positive at the 1 st lag length period but negative at the 2 nd lag length period, that is, the previous coefficient of Nigerian net trade for the model is positive at 1 st lag length period but negative at 2 nd lag length period but proved significant at 5% level of significance at only 1 st lag length period. This implies that Nigerian net trade (NT) does depend on its previous value; as such the higher the value of NT in the previous period, the higher its value will be in the current and future period and vice-versa during the period reviewed in Nigeria. The coefficient of DBF is negative and conforms to economics theory at current, 1 st and 3 rd lag length periods but positive at 2 nd and 4 th lag length periods. It is however statistically insignificant at five percent (5%) level at all the lag length periods. This implies that an increase in the deficit budget financing of the Nigerian government may not necessary contribute positively or retard the performance of the Nigerian external sector.
The FDI coefficient came out positive and conforms to economics theory at only current and 1 st lag length periods but negative at 2 nd and 3 rd lag length periods. It is however; at 5% level of significance, it statistically significant at 1 st lag length period. This indicates that when a more liberal trade policy is adopted by the Nigerian government to attract more foreign direct investment into the country, it will contribute positively to the performance of the Nigerian external sector.  foreign direct investment impact on the Nigerian net trade (NT) coupled with deficit budget financing has insignificant positive impact on the Nigerian net trade (NT) during the period reviewed in Nigeria. This shows that with the implementation of a more liberal trade by the Nigerian government to attract more inflow of foreign direct investment; foreign direct investment will contribute positively to the Nigerian external sector and the entire Nigerian economy in the long run.

DISCUSSION OF FINDINGS:
The Nigerian Net Trade (NT) and Deficit Budget Financing (DBF): Given that the coefficient of DBF is statistically insignificant at 5% level. As such, we do not accept the hypothesis that deficit budget financing will retard the performance of the Nigerian external sector and conclude that deficit budget financing has insignificant positive impact on Nigerian external sector performance during the period reviewed.

The Nigerian Net Trade (NT) and Foreign Direct Investment (FDI):
Given that the coefficient of FDI is statistically significant at 5%. We do accept the hypothesis that increase inflow of foreign direct investment into the Nigerian economy will stimulate and enhance the performance of the Nigerian external sector and conclude that foreign direct investment has significant positive impact on Nigerian external sector performance during the period reviewed.

CONCLUSION AND RECOMMENDATIONS:
This study carried out an empirical investigation of deficit budget financing and Nigerian external sector performance in Nigeria between 1990 and 2017. The findings of the study showed that 78% of the total variation in Nigerian net trade (NT) resulted from the explanatory variables (DFB and FDI) included in the model while the remaining 22 percent is explained by other variables that influence Nigerian net trade (NT) which were excluded from the model but were however, taken into consideration in the error term.
The study therefore concluded that: a) DBF has insignificant positive impact on the Nigerian external sector performance during the period reviewed. Since DBF has insignificant positive impact on the Nigerian external sector performance; the government should focus on holistic fiscal and monetary policies that will enshrine fiscal discipline for all levels of government and its agencies. This will enhance the performance of the Nigerian external sector. b) FDI has significant positive impact on the Nigerian external sector performance proved positive and significant during the period reviewed, as such; the government should implement an investment friendly policy that will attract foreign investors into the country's real sector and oil and gas sector.

ACKNOWLEDGEMENT:
As Ph.D. candidates, we acknowledge Professor Odi Nwankwo (our lecturer) for encouraging us to dare this; and also, for his contribution to the organization of this research effort.

REFERENCES:
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