Effect of Debt Financing on Deficit Budget Financing in Nigeria

Abstract

The study aims at examining the effect of debt financing on deficit budget financing (DBF) in Nigeria. Debt service (DS) payments to financial creditors internally and externally were used as determinants to debt servicing. Secondary data were collected from certified publications of the government and other authoritative organizations on monthly basis (2012 – 2017). Ordinary least square multiple regression was employed to test the time series data; revealing significant positive relationship between domestic debt service (DDS), external debt service (EDS) and a negative insignificant relationship with other debt service (ODS) with DBF.therefore recommends among other things that Government should cut substantial amount of debt it incurs to finance its budget deficit so as to reduce the burden of DS. The government should further diversify and strengthen its various sources of revenue to avoid unnecessary deficit.