Determinants of Budget Implementation in Nigeria

Abstract

The below-par performance of budget implementation (BI) in Nigeria has contributed to the country’s economic instability and public distrust in fiscal policies. This study primarily investigates the determinants of BI in Nigeria by focusing on foreign exchange rates (FEXR), inflation rates (INFR), interest rates (INTR), and corruption control (CINR). Using annual data from 2008 to 2024, this study employs time series analysis to examine the causal relationships between key macroeconomic variables and BI. Findings reveal that FEXR significantly influences BI, underscoring Nigeria’s fiscal vulnerability to FEXR fluctuations. INTR also exhibits a significant impact on BI, highlighting the importance of INTR policies in BI. Conversely, INFR has no direct effect on BI, suggesting that inflation’s influence on fiscal performance is secondary. The study concludes that Nigeria’s BI is usually undermined and disrupted by FEXR and INTR instability. The study recommends that the Nigerian government prioritize FEXR stability through sound monetary policies to mitigate currency-related fiscal risks. Furthermore, the Central Bank of Nigeria should implement measures to maintain favorable INTR, ensuring that borrowing costs do not hinder BI. Strengthening institutional accountability is essential to minimizing corruption’s negative effects on fiscal performance. These findings provide valuable insights for policymakers seeking to enhance budget efficiency and promote sustainable economic development in Nigeria.