Deficit Budget Financing and Fluctuations in Nigeria’s External Reserve

The study examined the relationship between deficit budget financing in the Covid-19 era and fluctuations in Nigeria's external reserve. External debt, Ways and Means Advances, and Treasury Bills formed the independent variables of the study, while external reserve was the dependent variable. The study adopted an ex-post-facto research design, covering the period between 2011 and 2020. Secondary data were extracted from the Central Bank of Nigeria Statistical Bulletin. The covariance technique was used for the data analysis. The data analysis revealed that Treasury bills have a strong but negative relationship with external reserves in Nigeria This implies that only treasury bills have a strong relationship with external reserves in Nigeria. The researcher recommended therefore that government policies on external reserves should factor in external debts because of their negative effect on external reserves. The government should avoid excessive borrowing from overseas. Government borrowings from the central bank do not have any bearing on the fluctuations in the external reserve of Nigeria because of the insignificant relationship between Ways and Means Advances and external reserves. However, means of generating revenue other than borrowing should be sought after. The government should cut down on the issue of treasury bills from the public. The government should look towards other forms of deficit budget financing such as privatization of redundant government establishments.