Fiscal Deficit on Capital Project and Economic Growth in Nigeria: The Nexus

The study investigated the nexus between fiscal deficit, capital project and economic growth in Nigeria with the main objective of determining the impact of fiscal (budget) deficit on capital projects/expenditure and GDP in Nigeria. The study was guided by Keynesian, Neoclassical, and Ricardian theories of budget deficit. This study made use of ex-post facto research design; Secondary data were collected from Central Bank of Nigeria (CBN) statistical bulletin of various years for the period 1981-2020. The presence of unit root was checked by using Augmented Dickey-Fuller (ADF). The Johansen Co- integration technique was used to determine the long run equilibrium relationships among the variables. Thereafter, the ordinary least square regression analysis was used to determine the magnitude and direction of the independent variables on the dependent variable(s). The study revealed that fiscal or budget deficit has negative impact on capital expenditure or project and economic growth in Nigeria. It was recommended that Government at all levels should reduce the volume of recurrent expenditure as it consumes almost 80% of the country’s revenue and Government and its MDA should stop multiplication of projects in the budgets as it is the major reason for fiscal deficit in Nigeria.