The Crowding Out Effect of Budget Deficits on Private Investment in Nigeria

It is an obvious fact that Budget Deficit has become a recurring decimal in the Nigeria’s economy.  Nigeria’s budget has recorded up to thirty - nine years of fiscal deficit without really considering the impact it will have in the rate of investment among the private sector. The bone of the contention is on where we can get the money to cover the difference between expenditure and revenue. Will it be borrowed from external forces or will it be raised internally through the increase in tax rate or the sale of fiscal instruments? It is in the light of this that this study emerged. Hence, the study shows the crowding out effect of budget deficits on private investments in Nigeria’s economy. It evaluates private investment and budget deficits by adopting an analytical framework that employs the ordinary least squares(OLS) and Granger Causality test. The analysis confirms that budget deficits crowds out private investments and that private investments granger cause budget deficit with feedback. Following the findings, it was recommended that stakeholders should reduce recurrent expenditure and increase its capital expenditure in order to encourage and make conducive environment for private investment to thrive which will ensure economic growth. The financing of budget deficits should be done through money creation, since over the years according to McConnell and Brue (2003), the expansionary effect of fiscal policy is greater when the budget deficit is financed through money creation rather than through borrowing. Keywords: Crowding out, Budget, Deficits,  investments, Fiscal, Monetary

The Relative Impact of External Capital on Manufacturing Output in Nigeria

External capital is one of the major sources of investible resources in most developing Countries and is made of foreign direct investment (FDI),foreign aid (AID) and external debt. In this study, the relative impact of external capital on manufacturing output, on one hand, and on Economic growth, on the other hand, in Nigeria,  are examined. Economic growth is proxied by gross domestic product (GDP) growth. Employing the Ordinary Least Squares (OLS) method and an annual time series data for the period between 1982 and 2013 obtained from World Bank’s website, it is found that in the short-run, a $1 inflow of FDI is accompanied by a statistically insignificant 0.45 cent reduction in manufacturing output, a$1 inflow of foreign aid is accompanied by a statistically significant 49 cents reduction in manufacturing output and a $1 inflow of external debt is accompanied by a statistically significant 18 cents reduction in manufacturing output. This implies that FDI has a zero impact on manufacturing output while AID and external debt has a significant negative impact on manufacturing output in Nigeria. Therefore, all forms of external capital have different levels of negative individual impact on manufacturing output in Nigeria. Also, it is found that in the short-run, a$1 inflow of FDI is accompanied by a statistically significant $13.4 reduction in economic growth, a$1 inflow of aid is accompanied by a statistically insignificant $5.68 increase in economic growth and a$1 external loan inflow is accompanied by a statistically insignificant $1.73 increase in economic growth. This implies that FDI has a significant impact on economic growth, while AID and external debt has an insignificant or zero impact on economic growth. Therefore, not all forms of external capital do have significant impact on economic output in Nigeria. It is therefore recommended that government should make the business environment more investor friendly, make doing business in Nigeria easy, ensure prudent borrowing, ensure appropriate utilization of borrowed funds, ensure project continuity and ensure financial inclusiveness. Keywords: Foreign direct investment, foreign aid, external debt, manufacturing output, economic growth.

The Impact of Telecommunication Expenditure on Economic Growth in Nigeria

This paper examined the impact of telecommunication expenditure on economic growth in Nigeria using time series data from 1970 to 2010. In conducting the analysis, the unit root tests and co-integration tests were estimated using the Augmented Dickey-Fuller technique. The estimated results show that telecommunication, Foreign Direct Investment (FDI) and the degree of trade openness have positive impact on economic growth in Nigeria while unemployment has negative impact. The unit root test shows that real GDP and the degree of trade openness are integrated of order one, I(1) while telecommunication is and the FDI are integrated of order zero. Key words: Economic Growth, Telecommunication, unemployment and Trade openness, Nigeri

The Impact of Exchange Rate Dynamics on Capital Inflows in Nigeria (1970-2010 )

Exchange rate dynamics has been a persistent factor affecting capital accumulation in developing economies especially in the area of capital inflows which measures the rate of movement of capital into an economy as it concerns its international consumption-investment relation with other economies. However, there are many factors that affect the rate of capital inflows and outflows into and out of a given economy. This work examines the impact of exchange rate fluctuations on capital inflows in Nigeria from 1970-2010. Using the generalized autoregressive conditional heteroscedasticity (GARCH) model, results obtained indicate that the impact of exchange rate fluctuations on capital movement into Nigeria economy at this period is not so intense as that of  its trade openness. The study therefore, recommends that trade openness policies should be formulated and implemented such that they would induce maximum capital inflows needed for economic growth. Key words: Capital,  Inflows,  Exchange rate, Volatility, and Inflatio