Analyzing the Signaling Effect of Public Debt to Foreign Investment in Nigeria

Abstract

This study examines the effects of public debt on foreign investment performance in Nigeria. This was aimed at ascertaining how DPD for domestic public debt, FDB for external public debt, and DS is for fiscal deficit have stimulate the foreign direct investment (FDI) performance in Nigeria for the period 2000 to 2021. Historical data was collated and estimated employing the ARDL- based Ordinary Least Squares (OLS) technique. The empirical results indicate that foreign direct investment responded to domestic debt and debt servicing negatively, but positively to foreign public debt in Nigeria. On the basis of the findings of this study, the following recommendations are made. The government should regularly review their domestic debt policy for reduction, policies that promote more foreign debt be adopted as against domestic debt and government should invest debt on income-generating ventures to reduce the burden of servicing.

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