Deficit Financing and Standard of Living in Nigeria

Empirically diagnosed here is how deficit financing impacts on living standard of Nigerians. Living standard is indicated by gross domestic product per capita while deficit financing is applied as borrowings from the (African Development Bank, World Bank, International Monetary Funds, private financial institutions) and debt service payments. Yearly time-based data taking from 1990 to 2023 were obtained for analysis from the (National Bureau of Statistics’ report, Central Bank of Nigeria’s statistical bulletin and Debt Management Office reports). The Autoregressive Distributed Lag (ARDL) technique is applied as the analytical method from which outcome showed that filling fiscal deficit gap from African Development Bank, World Bank, International Monetary Funds, and private financial institutions’ borrowings produced positively significant effects on Nigerians’ living standard indicated as gross domestic product per capita, conversely, debt repayment obligations appeared negatively significant on the regressand. The findings emphasize the significance of deficit financing as fiscal policy measure for strategically improving the country’s standard of living status, but unsustainable obligation for debt service crowd investable funds, resulting in low living standard. Thus, it is necessary to highlight need for improving the country’s debt management strategies by prioritizing development institutions’ concessional loans; as such from the African Development Bank and the World Bank can suffice to enhance long-run standard of living, ensure targeted deployment of borrowed funds, and disciplined management of debt scale for sustainability.