Effect of Public Debt on the Economic Growth of Nigeria (1986 – 2020)

Chima Kenneth Anachedo, Amalachukwu Chijindu Ananwude, Dr Felix Nwaolisa Echekoba and Andrew Izuchukwu Nnoje
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Chima Kenneth Anachedo: Department of Banking and Finance, Nnamdi Azikiwe University, Anambra State, PMB 5025, Awka, Nigeria
Amalachukwu Chijindu Ananwude: Department of Banking and Finance, Nnamdi Azikiwe University, Anambra State, PMB 5025, Awka, Nigeria
Dr Felix Nwaolisa Echekoba: Department of Banking and Finance, Nnamdi Azikiwe University, Anambra State, PMB 5025, Awka, Nigeria
Andrew Izuchukwu Nnoje: Department of Banking and Finance, Nnamdi Azikiwe University, Anambra State, PMB 5025, Awka, Nigeria

International Journal of Research and Innovation in Social Science, 2022, vol. 6, issue 5, 794-800

Abstract: This study examined the effect of public debt on economic growth in Nigeria. Specifically, the effect of domestic debt and external debt on real gross domestic product was ascertained. This study applied a test of causation to determine the effect of public debt on economic growth in Nigeria from 1986 to 2020. The secondary data were obtained from the Central Bank of Nigeria (CBN) statistical bulletin of various issues. The dependent variable is economic growth measured by real gross domestic product, while the independent variable is public debt measured by domestic debt and external debt. The short-run relationship depicted that domestic debt has insignificant negative relationship with economic growth in Nigeria, whereas external debt has positive significant relationship with economic growth. With respect to the effect of domestic debt and external debt on economic growth, the granger causality test revealed that there is a bidirectional causal relationship between domestic debt and economic growth in Nigeria. This is to say that domestic debt has significant effect on economic growth. Similarly, it was also found that economic growth exerts significant effect on domestic debt. Though external debt would not be considered as an evil fiscal policy arrangement of the government, external loans contracted should be properly and efficiently channeled to capital expenditure which improves the manufacturing sector capacity, generates employments and reduced poverty which ultimately result in the acceleration of the pace of economic growth.

Date: 2022
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