Deficit Financing Threatens Naira Stability, Raises Borrowing Costs, CBN Research Finds

Nigeria’s growing fiscal imbalances could undermine efforts to stabilise the naira and make borrowing more expensive for businesses as government budget deficits continue to exert pressure on key macroeconomic indicators, a new Central Bank of Nigeria (CBN) research has found.
The research warned that sustained fiscal expansion could complicate monetary management, with the effects extending beyond the foreign exchange market to interest rates and the availability of money in the economy.
Findings from the study, titled “Budget Deficit Dynamics and Macroeconomic Performance in Nigeria,” showed that budget deficits have a significant influence on exchange rate movements, with their imp...