Fiscal Sustainability, Economic Growth, and the Sustainable Development Goals: Evidence from Nigeria

The study analyses the interrelationships among fiscal deficits, fiscal sustainability indicators and economic growth in Nigeria from the point of view of achievement of the United Nations' Sustainable Development Goals (SDGs). Special attention is paid to SDG 8 (Decent Work and Economic Growth) and SDG 17 (Domestic Resource Mobilization). Annual time series data were applied to apply the Autoregressive Distributed Lag Approach (ARDL) and Error Correction Model (ECM). Empirical results show a dual effect of fiscal deficits on growth in the context of SDG 8 goals. On one hand, deficit financing leads to increase in growth rate because of stimulation of aggregate demand and support for productive expenditures in the short run. However, fiscal deficits exert a negative influence on growth in the long run due to increase in government debt, domination of recurrent expenditures and reduction of private sector investments. Results also indicate that there is an insignificant relationship between the debt to GDP ratio and growth in Nigeria at the level of 5 percent significance but at the level of 10 percent this relationship becomes marginal. This study highlights the importance of fiscal sustainability as a foundation for inclusive and resilient growth, calling for improved fiscal discipline, prioritization of SDG-aligned spending, debt sustainability, and increased revenue generation.

Fiscal Sustainability; Economic Growth; Sustainable Development Goals (SDGs); Macroeconomic Stability; Nigeria.

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