CBN study links Nigeria’s fiscal deficits to currency depreciation

Nigeria’s persistent budget deficits are weakening the naira and contributing to higher interest rates, according to a study published in the Central Bank of Nigeria’s Journal of Applied Statistics. The research, titled ‘Budget Deficit Dynamics and Macroeconomic Performance in Nigeria,’ examined the relationship between fiscal deficits and key economic indicators using annual data covering 1981 to 2024. Authored by Ndubuisi E. Uguru, the study identified government fiscal imbalances as a major source of exchange rate instability, while warning that their effects could constrain monetary policy and discourage private investment. Using a Vector Autoregressive framework, the research found that budget deficits account for a substantial proportion of exchange rate fluctuations and con...