Currency Devaluation and Fiscal Adjustment in Nigeria

Abstract

This study empirically examined currency devaluation and fiscal adjustment in Nigeria. Specifically it also examined the extent to which currency devaluation affects government expenditure and revenue in Nigeria. Co-integration, Vector Error Correction, Ordinary Least Square and Granger Causality methods were adopted in the analysis. The data spanning between 1981 and 2014, and essentially sourced from the Central Bank of Nigeria Statistical Bulletin were also used. The result of the empirical study principally shows that a positive and causal relationship exists between currency devaluation and some selected fiscal variables. Given the observed direct relationship between government expenditure and currency devaluation, it is recommended that the Nigerian government should rationalize and restructure her expenditures towards productive economic activities and reduce fiscal deficits significantly