Fiscal Rules and Budget Deficit Control in Emerging Economies: Evidence from Nigeria (2023-2026)

Abstract

This study examined fiscal rules and budget deficit control in emerging economies, with evidence from Nigeria between 2023 and 2026. Rationale for the study was the persistent fiscal deficits in Nigeria despite formal fiscal regulations designed to ensure discipline and sustainability. The main objective was to assess effects of Fiscal Responsibility Act (FRA 2007) enforcement, adherence to public debt rules, and growth in government expenditure on budget deficit control during the study period. A descriptive research design was adopted, and secondary data were obtained from official government publications and international databases. Data were analyzed using descriptive statistics, correlation analysis, and multiple regression. Descriptive results indicated that the average budget deficit in Nigeria was 4.7 percent of gross domestic product, while government expenditure growth averaged 18.6 percent. The enforcement of FRA and compliance with public debt rules had moderate mean values of 62.4 percent and 58.9 percent, respectively, reflecting uneven application of fiscal rules. Correlation analysis revealed a negative relationship between FRA enforcement and budget deficit control (r = -0.61), and between public debt compliance and deficit control (r = -0.54), whereas government expenditure growth showed a strong positive relationship with budget deficits (r = 0.67). Regression results supported these findings, showing that FRA enforcement (β = -0.031) and public debt compliance (β = -0.027) significantly reduced budget deficits at the 5 percent level, while government expenditure growth (β = 0.089) significantly increased deficits. The model explained approximately 74 percent of variation in budget deficit control. Based on these findings, the study concludes that fiscal rules can effectively reinforce deficit control when enforcement is credible and expenditure growth is managed. Consequently, institutional enforcement and expenditure discipline should be strengthened to achieve fiscal sustainability in Nigeria.