An empirical inquiry into the effccts of fiscal deficits on state government capital projects in nigeria over the 1985-1994 period

Project Abstract

This research project aims to conduct an empirical inquiry into the effects of fiscal deficits on state government capital projects in Nigeria over the period of 1985-1994. Fiscal deficits have been a significant concern for many developing countries, including Nigeria, as they can have various implications for the economy. The study will focus on understanding how fiscal deficits impact the implementation of capital projects by state governments in Nigeria during the specified timeframe. The research will utilize a combination of quantitative analysis and qualitative methods to investigate the relationship between fiscal deficits and state government capital projects. Data on fiscal deficits will be collected from official government sources and relevant publications. Additionally, information on state government capital projects will be gathered through reports and documentation from state agencies. By analyzing the data collected, the research aims to provide insights into the extent to which fiscal deficits have influenced the implementation of capital projects by state governments in Nigeria. The study will also explore the mechanisms through which fiscal deficits can affect the planning, funding, and execution of capital projects at the state level. This analysis will contribute to a better understanding of the challenges faced by state governments in Nigeria in managing their fiscal resources for infrastructure development. The findings of this research project are expected to have implications for policymakers, economists, and development practitioners in Nigeria. By identifying the effects of fiscal deficits on state government capital projects, the study can inform policy decisions aimed at improving the efficiency and effectiveness of public investment in infrastructure. Furthermore, the research may offer recommendations for mitigating the adverse impact of fiscal deficits on the implementation of capital projects by state governments. Overall, this research project seeks to advance the understanding of the relationship between fiscal deficits and state government capital projects in Nigeria. By examining data from the period of 1985-1994, the study aims to shed light on the historical trends and patterns that have influenced infrastructure development at the state level. Ultimately, the findings of this research have the potential to contribute to the enhancement of public financial management practices and the promotion of sustainable infrastructure development in Nigeria.

Project Overview

<p> </p><p>1.0 INTRODUCTION<br>The chapter is intended to be introductory in nature, shedding light on the effects of tiscal deficit on state government capital projects in Nigeria. This feat will be achieved through a brief description of fiscal deficits and capital projects.<br>The chapter will also contain statements on the purpose of study, objectives of study, the constraints in the course of the study as well as the organization of work as it will be encountered in this study.</p><p>1.1 GENERAL PERSPECTIVES<br>The concept of fiscal deficits will be described in the context of its meaning and implications in sub-section 1.1.1. while the trend of fiscal deficit will be the subject of attention in sub-section 1.2.2</p><p>1.1.1 The Concept of Fiscal Deficit<br>Fiscal deficits results from the budgetary operations of the government when the total expenditure exceed the revenue for a given period. The effect of a given overall deficit on aggregate demand de~endso n the way the deficit is financed. Financing can come from external and/or domestic borrowing whcn financing comes from external source and is tied to expenditure abroad, there will<br>be no immediate impact on domestic demand. But foreign borrowing used to finance domestic expenditure will have an expansionary impact on the domestic economy.<br>Domestic sources of deficit financing can be divided into three;<br>a) The Central Bank<br>b) The Commercial/Merchant Banks, and<br>c) Non-Bank Sources<br>Net borrowing from the Central Bank is usually expansionary as the increase in credit to the government is not necessarily compensated for by a reduction in credit to the private sector. Consequently, the increase to the government increases the monetary base and through the money multiplier, the<br>money supply, thus leading to an expansionary economy. If the con~mercial/merchant banks did not have available excess reserves that could be lent to government to finance the deficit, the government’s<br>borrowing would be at the expense of loans to other sectors. If the banks had the excess reserves or the Central Bank makes such available, there would be no offsetting impact on other sectors, so that the credit given to government will<br>expand aggregate demand and ultimately the money supply.<br>The impact of non-bank borrowing on private sector demand is not too certain. If this comes from voluntary purchases of government debt instruments, the liquidity of the private sector will fall, although it’s wealth is not affected.<br>This could however trigger off an increase in interest rates which could crowd out private sector investments. However, in a period of monetary ease, such crowding out will not take place.<br>1.1.2. Trend of Fiscal Deficit<br>In recent year, state government have been faced with a current fiscal<br>surplus and overall fiscal deficits in their operations. This can be attributed to increase expenditures occasioned by a host of factors including deteriorating infrastructures, growing population and difficulties or broadening the tax base to enhance government earnings.<br>1.1.3 Capital Projects<br>Capital projects are projects that require huge expenditures in the provision of instrun~ents and social amenities, and social goods.</p><p>1.2 PURPOSE OF STUDY<br>The purpose of this study is to determine empirically, the effects of fiscal deficits on state governments capital projects in Nigeria between the years 1985 and 1994, both years inclusive.<br>1.3 STATEMENT OF PROBLEMS<br>Fiscal policy, to a large extent, determines the level of fiscal deficit incurred in any period. The policy is aimed at influencing the consumption pattern in the economy in order that the broad macro-economic objectives of the economy can be achieved. In view of the above assertions, the problems of this study are itemized below;<br>1. Did the fiscal deficits of the Federal Capital Territory and the different states of the federation, between 1985 and 1994 lead to an increase in state governments capital projects?</p><p>2. If the fiscal deficits led to increases in state governments capital projects, to what extent was the increase in state governments capital projects attributable to fiscal deficits?<br>1.4 OBJECTIVES OF STUDY<br>The objectives of this study, which are derived from the problems of the study as enumerated in section 1.3 above, are statements of intentions with regards to how the problems of the study are to be solved.<br>1. To ascertain if there was a direct increase in state governments capital projects between 1985 and 1994 as a result of fiscal deficits recorded in the operations of the state governments.<br>2. To determine the extent to which changes in the level of state government capital projects are as a result of</p> <br><p></p>