Economic and Financial Review


Central Bank of Nigeria


Exchange Rate, Fiscal Deficit, Current Account Deficit


This study investigates the twin deficits hypothesis for Nigeria while accounting for the role of exchange rate. The study utilises annual data series spanning 1981 to 2019 and the ARDL modelling technique for the estimations. Among other findings, the study reveals the existence of a bi-directional causation between current account deficit and fiscal deficit. Similarly, a positive relationship was seen to exist between current account balance and fiscal balance in both the short-run and long-run during periods of exchange rate appreciation and depreciation, thus confirming the role of exchange rate in the twin deficit hypothesis in Nigeria. The study recommends the introduction of a debt ceiling for governments, an improvement in the efforts towards non-oil export promotion, minimising imports and improving revenue generation.

Author Bio

The authors are staff of the Research Department, Central Bank of Nigeria, Abuja.

Publication Title

CBN Economic and Financial Review





First Page


Last Page



F31, F32, H62

Recommended Citation

Sanni, G. K., Gaiya, B. A., Ipinjolu, O. A., Aliyu, V. O., & Okafor, S. N. (2022). Twin Deficits in Nigeria: Where Does the Exchange Rate Fit? CBN Economic and Financial Review, 60(1). 67 - 91.



To view the content in your browser, please download Adobe Reader or, alternately,
you may Download the file to your hard drive.

NOTE: The latest versions of Adobe Reader do not support viewing PDF files within Firefox on Mac OS and if you are using a modern (Intel) Mac, there is no official plugin for viewing PDF files within the browser window.