Government Debt and Manufacturing Sector Output Nexus in Nigeria: An Empirical Analysis
Madubuike Kenneth O., Uma, Idika Kalu Rilwani, Abdullahi Onehi, Damian Haruna
Abstract
This study examined government debt and manufacturing sector output nexus in Nigeria. Government borrows where need be to improve the economy and welfare of her citizens. This is done to invest in strategic sectors and growth enhancing amenities. It is obvious that the poor management of debt has contributed to the sorry state of the Nigerian economy. Funds borrowed may not be properly deployed or allocated to the various productive sectors of the economy, to guarantee future growth. The specific objectives were to: evaluate the effect of domestic debt; foreign debt and debt servicing on manufacturing sector output in Nigeria. The ex-post factor research design was adopted and the study anchored on the Neo-classical debt theory. Data was obtained from Central Bank of Nigeria statistical bulletin covering 1988 to 2022 and analysed using descriptive statistics, Error Correction Model (ECM) technique and testing at 5% significant level. The findings of the study showed that: domestic debt had a positive (0.456098) and significant (0.0226) effect; foreign debt had a negative (-0.004349) and non-significant (0.8701) effect; debt servicing had a negative (-0.003469) and non-significant (0.6402) effect on manufacturing sector output in Nigeria for the period reviewed. Furthermore, adjusted R2 value was 0.627640, DW was 1.815339 and prob(F-statistic) was 0.000000. It was concluded that government debt can affect manufacturing sector output, hence need to be properly channeled so as to achieve the desired positive and significant effect. The study recommended that: Government should direct the borrowed funds to the diversification of the productive base of the economy; maintain sustainable level of external debt in order to achieve desirable level of growth and as well ensure that fund borrowed should partly be put to support the manufacturing sector.
Keywords
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