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| Title: | Effects of Deficit Financing on Human Development Index in Nigeria |
| Author(s): | Nwankwo N.U, Ewubare D.B & Agwumafa O. S. |
| Abstract: | This study examines the relationship between deficit financing and human development index in Nigeria from 1990 to 2022, utilizing time series data sourced from the World Development Indicators and the CBN Statistical Bulletin. The specific objectives are to ascertain the effect of bilateral debt, multilateral debt, CBN loans and external reserves on human development index in Nigeria. The data analysis techniques employed include descriptive statistics, unit root tests, bounds cointegration, the autoregressive distributed lag (ARDL) estimation method, and residual diagnostics tests. The KPSS unit root tests reveal a mix of I(1) and I(0) series, indicating that the variables differ in their levels of integration. Evidence of cointegration is established, suggesting a long-term equilibrium relationship among the variables. The ARDL results indicate that bilateral debt contributed negatively to HDI, suggesting that a unit increase in bilateral debt deters the Human Development Index in Nigeria. Furthermore, evidence of a positive and not statistically significant effect of the Central Bank of Nigeria on HDI was established in the long run; this indicates that a unit increase in Central Bank of Nigeria loans increases HDI. In addition, the results further show that external reserves positively and insignificantly affected HDI in the long run, indicating that a unit increase in external reserves increases HDI in Nigeria. Additionally, the result shows that multilateral debt positively contributes but has a not statistically significant impact on Nigeria‘s HDI, indicating that a unit increase in multilateral debt increases HDI in the long run. More so, the error correction coefficient (-0.044713) is negative and significant at the 5 per cent level, indicating that about 4.47 per cent of distortions from long-run equilibrium will be adjusted each year.Owing to the findings, this study concludes that bilateral debt is detrimental for human development index of the Nigerian economy. Thus, it is recommended among others that it is crucial for the government to reassess and potentially restructure existing bilateral debt agreements. This could involve negotiating more favorable terms that align better with Nigeria‘s development goals, such as lower interest rates or longer repayment periods. |
| Keywords: | Deficit Financing, HDI, ARDL, KPSS. |
| Journal: | Journal of Economic Research and Development Studies Vol 1 No 1 |
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