ABSTRACT

The objective of this work is to investigate the twin deficit hypothesis in Nigeria from 1981-2015. The study made use of secondary data sourced from the Central Bank of Nigeria statistical bulletin. The variable used for the study is Current Account Deficit (CAD) being the dependent variables are Budget Deficit(BD), Real Gross Domestic Product(RGDP) .Manufacturing Output Product (MOP) and Real exchange rate (RER) Using Ordinary Least Square Method (OLS) multiple regression techniques, the study revealed that there is no causal relationship between current account deficit and budget deficit in Nigeria. The study also reveals that there is a positive relationship between budget deficit and current account deficit in Nigeria such that an increase in the budget deficit will trigger a worsening of current account position thereby reaffirming the twin deficit phenomenon in Nigeria. Persistent budget deficit may lead to chronic current account disequilibrium which may further hinder economic growth. Government must in that pursue fiscal policy that aligns expenditure with revenue. Government should also keep budget deficit within manageable limit and encourage the development of viable manufacturing sector so as to improve the current account position of the economy.