An Empirical Analysis of Public Borrowing and Economic Growth in Nigeria

Ayodele Thomas Duro, Williams Harley Tega, Afolabi Taofeek Sola and Adeyanju David Olanrewaju
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Ayodele Thomas Duro: Department of Finance, Redeemer's University, Ede, Nigeria
Williams Harley Tega: Department of Finance, Redeemer's University, Ede, Nigeria
Afolabi Taofeek Sola: Department of Finance, Redeemer's University, Ede, Nigeria
Adeyanju David Olanrewaju: Department of Finance, Redeemer's University, Ede, Nigeria

International Journal of Economics and Financial Research, 2020, vol. 6, issue 11, 243-248

Abstract: This study seeks to evaluate the impact of public borrowing on economic growth in Nigeria using time series data from 1980 to 2018. Specifically, the study seeks to analyze the effect of domestic debt (proxy by Federal Government Bonds-FGB) and external debt (proxy by International Monetary Fund Loan-IMFL) on Nigerian’s Gross Domestic Product (GDP). To achieve this objective, secondary data was collected from the Central Bank of Nigeria Statistical bulleting and the Debt Management Office of Nigeria. A multiple regression model involving the dependent variable (GDP) and the independent variables (FGB and IMFL) was formulated and subjected to econometric analysis. These variables were adjusted with the Jarque-bera test of normality while the correlation result was used to check the possibility of multi-collinearity among the variables. The t-test was used to answer the research questions and test the formulated hypotheses at the 5percent statistical level. Results from the analysis show that a positive relationship exists between IMF Loan and Nigeria’s gross domestic product, while a negative relationship exists between FG Bonds and Nigeria’s gross domestic product, which violates the Keynesian theory of public debt. The study concludes that both domestic and external debt significantly affect economic growth in Nigeria. Therefore, it was recommended that public borrowing should be efficiently used and contracted solely for economic reasons and not for social or political reasons as this will help to avoid accumulation of debt stock over time.

Keywords: Federal government bond; IMF loan; Keynesian theory of public debt (search for similar items in EconPapers)
Date: 2020
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