Conscientia Beam || conscientiabeam.com

Export to

Citations

Contact Us

For Marketing, Sales and Subscriptions Inquiries

2637 E Atlantic Blvd #43110
Pompano Beach, FL 33062

USA

Conference List

International Journal of Sustainable Development & World Policy

June 2019, Volume 8, 2, pp 68-82

Government Borrowing Behaviour: Implications for Private Sector Growth in Nigeria

Abubakar Ado, Ahmad

Adegoke Ibrahim, Adeleke

Augustine, Ujunwa

Abubakar Ado, Ahmad¹ ^,

Adegoke Ibrahim, Adeleke¹ Augustine, Ujunwa¹

Monetary Policy Department, Central Bank of Nigeria. ¹

on Google Scholar

on PubMed

Pages: 68-82

DOI: 10.18488/journal.26.2019.82.68.82

Article History:

Received: 19 June, 2019
Revised: 25 July, 2019
Accepted: 27 August, 2019
Published: 30 October, 2019

View Citation

155Views

Create Citation Alert

Abstract:

This study seeks to examine the relationship between government borrowing behaviour and private sector growth in Nigeria. It utilises the Structural Vector Auto-regressions (SVAR) model to analyse the dynamics of government borrowing behaviour on the growth of private sector in Nigeria. The results from impulse response functions and variance decomposition appear to provide evidence that government borrowing behaviour has the tendency of impacting negatively on the effectiveness of private sector grow in Nigeria. This result can be explained, based on the fact that government has higher capacity to borrow than the private sector and this tends to crowd-out private sector in mobilising funds for investment and thus impacted negatively on their capacity to grow. The study, therefore, recommends that both fiscal and monetary authorities should improve on measures and policies that could enhance private sector growth, as higher government debt could create burden for future generations, disrupt movements in interest and exchange rates as well as hinder private investment. Doing this has the potentials of improving performance of private sector and the aggregate economy in Nigeria, since empirical literature is replete with evidence of existence of these channels.

Contribution/ Originality
This study improves on the existing literature by examining the channels and extent of the impact of government borrowing behaviour on the private sector growth in Nigeria, as previous literature has shown varying and often conflicting results due to diversity in the structure of the economy and governance. The study, therefore, confronts the existing theories with recent data and tailor-made methodology.

Keywords:

Government domestic debt, Private sector development, SVAR, Nigeria, Crowding out, Domestic savings.

Reference:

Alesina, A. and R. Perotti, 1993. Income distribution, political instability, and investment. Unpublished Manuscript, Harvard University.

Alesina, A. and R. Perrotti, 1994. The political economy of budget deficits, National Bureau of Economic Research Working Paper, No. 4637, 1050 Massachusetts Avenue, Cambridge.

Alesina, A. and G. Tabellini, 1989. External debt, capital flight and political risk. Journal of International Economics, 27(3-4): 199-220.Available at: https://doi.org/10.1016/0022-1996(89)90052-4.

Amisano, G. and G. Giannini, 1997. Topics in structural VAR econometrics. 2nd Edn., Springer Verlag.

Anand, R. and V.S. Wijnbergen, 1989. Inflation and the financing of government expenditure: An introductory analysis with an application to Turkey. The World Bank Economic Review, 3(1): 17-38.Available at: https://doi.org/10.1093/wber/3.1.17.

Anyanwu, A., C. Gan and B. Hu, 2017. Government domestic debt, private sector credit, and crowding out effect in oil-dependent countries. Journal of Economic Research, 22(2): 127-151.

Anyanwu, J.C., A. Oyefeso, H. Oaikhenan and F.A. Dimowo, 1997. The structure of the Nigerian economy (1960-1997). Onitsha: Joanee Eductional Publishers Limited.

Aschauer, D.A., 1989. Is public expenditure productive? Journal of Monetary Economics, 23(2): 177-200.Available at: https://doi.org/10.1016/0304-3932(89)90047-0.

Baron, R.J., 1985. Government spending, interest rates, prices and budget deficits in the United Kingdom, 1730-1918. University of Rochester Working Paper.

Baron, R.J., 1986. U.S. deficits since world war I. Scandinavian Journal of Economics, 88: 193-222.

Barro, R.J., 1987. Government spending, interest rates, prices, and budget deficits in the United Kingdom, 1701–1918. Journal of Monetary Economics, 20(2): 221-247.

Blanchard, O., 1984. Debt, deficit and finite horizons, national bureau of economic research Working Paper, No. 1389, 1050 Massachusetts Avenue, Cambridge.

Breitung, J., R. Bruggemann and H. Lutkepohl, 2004. Structural vector autoregressive modeling and impulse responses, in H. Lutkepohl & M. Kratzig (eds), Applied Time Series Econometrics, Cambridge: Cambridge University Press. pp: 159-196.

Friedman, B.M., 1978. Crowding out or crowding in? The economic consequence of financing government deficits, national bureau of economic research Working paper, No. 284, 1050 Massachusetts Avenue, Cambridge.

Hargen, J.V. and I. Harden, 1996. Budget process and commitment to fiscal discipline, International Monetary Fund, WP/96/78. Washington: International Monetary Fund.

Johansen, S., 1988. Statistical analysis of cointegration vectors. Journal of Economic Dynamics and Control, 12(2-3): 231-254.Available at: https://doi.org/10.1016/0165-1889(88)90041-3.

Johansen, S. and K. Juselius, 1990. Maximum likelihood estimation and inference on cointegration—with applications to the demand for money. Oxford Bulletin of Economics and Statistics, 52(2): 169-210.Available at: https://doi.org/10.1111/j.1468-0084.1990.mp52002003.x.

Lidiema, C., 2018. Effects of government borrowing on private investments in Kenya. Journal of Finance and Economics, 6(2): 49-59.Available at: https://doi.org/10.12691/jfe-6-2-3.

Lucas, J.R.E. and N.L. Stokey, 1983. Optimal fiscal and monetary policy in an economy without capital. Journal of Monetary Economics, 12(1): 55-93.Available at: https://doi.org/10.1016/0304-3932(83)90050-8.

Nigerian Extractive Industry Transparency Initiative (NEITI), 2013. Financial, physical and process audit: An independent report assessing and reconciling physical and financial flows within Nigeria’s oil and gas industry. Available from https://eiti.org/sites/default/files/documents/2013_nigeria_eiti_report_oil-gas.pdf.