IMPACT OF PUBLIC DEBT ON NIGERIA ECONOMY

Abstract

This study seeks to evaluate the impact of public debts on economic growth in Nigeria using time series data from 1983 to 2023. To achieve these objectives, the time series data were subjected to unit root test to remove the possibility of spurious regression due to non-stationarity of data. Three models were formulated and an Autoregressive Distributed Lag (ARDL) Cointegration Technique was used as method of analysis. The variables used in the study were further subjected to bound test and other econometric tests. The data were co-integrated at order 1(1) and order 1(0). The long run relationship of the underlying variables is detected through the F-statistic (Wald test). To achieve the objectives of this study, three economic models were formulated to proxy public debt and economic growth in Nigeria. The model one shows that economic growth can be proxy with financial development variable (FINDEV) while public debt is proxies with other variables such as federal government bond, external debts etc. The result of the findings shows that public debts affect economic growth in Nigeria. Also, it reveals that external debts are important in Nigeria but its effect does not significantly affect economic growth in Nigeria and that domestic debt is finance with huge resources but does not significantly affect economic growth. The study therefore, recommended that government should ensure that all public debts match the amount of infrastructure in the country as the major reason for borrowing should be to finance infrastructure. Therefore, whatever policy the government embarks upon should be stable, very relevant to the Nigerian economy, and also creates an enabling environment for existing and potential investors that would contribute to economic growth.