Fiscal Deficit and Human Development: Empirical Evidence from Nigeria

Authors

Elijah O. Akanni DR, Central Bank of NigeriaFollow

Keywords

Fiscal deficit, human development, health, education, machine learning

Abstract

This study investigates the effects of fiscal deficits on human development in Nigeria from 1990 to 2021, employing standard econometric and machine learning approaches. Specifically, the paper applies autoregressive distributed lag (ARDL) models to examine linear relationships, and multivariate adaptive regression splines (MARS) to capture linear and nonlinear interactions among key variables influencing human development. Results from the ARDL analysis reveal that fiscal deficit does not significantly impact human development in Nigeria both in the short- and long run. However, MARS results indicate that fiscal deficits only enhance human development when kept below 1.34% of GDP but become detrimental beyond this threshold, suggesting fiscal sustainability constraints. Nevertheless, this adverse impact can be mitigated, or even reversed, when accompanied by stronger economic capacity. The study also finds that access to electricity is a key driver of human development, underscoring its role in improving healthcare, education, economic productivity, and overall living standards. To harness the benefits of fiscal deficits for human development, the study recommends directing deficit spending toward critical sectors, enforcing fiscal rules to maintain sustainable deficit levels, conducting regular fiscal policy assessments, and prioritising long-term infrastructure investments, particularly electrification projects.

Issue

15

Volume

2

First Page

37

Last Page

70

Recommended Citation

Akanni, Elijah O. DR (2024) "Fiscal Deficit and Human Development: Empirical Evidence from Nigeria," CBN Journal of Applied Statistics (JAS): Vol. 15: No. 2, Article 2.
Available at: https://dc.cbn.gov.ng/jas/vol15/iss2/2