Fiscal Deficit Financing Strategies and Human Development Outcomes in Nigeria

The study delved into the intricate relationship between fiscal deficit financing strategies and human development outcomes in Nigeria, spanning from 1981 to 2024. By examining domestic and external debt as the main financing mechanisms and utilizing the Human Development Index (HDI) as a measure of human welfare, the research was anchored in both the Neoclassical and the Keynesian theoretical frameworks. Employing the Autoregressive Distributed Lag (ARDL) bounds testing approach, the analysis revealed a stable long-term cointegrating relationship among the variables. The findings indicated that both domestic and external debt significantly adversely affect Nigeria's HDI in both short-term and long-term contexts. Specifically, the domestic debt tends to crowd out private investment and essential social expenditure, while the long-term negative ramifications of the external debt are notably exacerbated by foreign exchange shortages, austerity measures, and an overwhelming debt servicing burden. The study concluded that Nigeria's ongoing dependence on debt to address fiscal deficits has detrimental consequences for human development, hampering advancements in vital sectors such as health, education, and living standards. To mitigate these issues, the research advocated for a comprehensive policy framework aimed at enhancing domestic revenue generation, prioritizing productive infrastructure borrowing, and promoting long-term economic diversification and institutional fortification.