Abstract

This study examined the impact of budget deficit on economic recovery in Nigeria between 1981 and 2021 using Auto Regressive Distributed Lag (ARDL) model as analytical tool. Real gross domestic product was used as the dependent variable while federal government domestic debt and government expenditure was used as the explanatory variables and interest rate used as control variable. Data was extracted from the Central Bank of Nigeria statistical bulletin. Unit root test was carried out using Augmented Dickey Fuller (ADF) approach. ARDL cointegration, bound test and error correction model estimation techniques were also employed. Findings revealed that federal government expenditure had significant positive impact on real gross domestic product while domestic debt had significant negative impact on real gross domestic product. The study recommends that government should ensure an efficient public expenditure process and effective fiscal discipline as well as maintenance of macroeconomic stability. Also government should increase expenditure on areas of economic development and building of infrastructures that are capable of promoting economic growth and stability in Nigeria.