Estimated Effect of Public Debt on Economic Performance in Nigeria

Abstract

This study examined the relationship between public debt and Nigerian economic performance. The objective was to establish the relationship that exists between public debt and Nigerian economic growth. Annual time series data was sourced from Central Bank of Nigeria Statistical Bulletin various issues. Economic performance was measured by real gross domestic product while public debt was measured by Nigerian external debt, domestic debt and debt servicing. The ordinary least square method of cointegration, Augmented Dickey Fuller Unit Root Test, Vector Error Correction Model and Granger Causality test was used to estimate the dynamic relationship between the dependent and the independent variable. The study found that external debt and domestic debt have positive and significant relationship with Nigerian Real Gross Domestic Product while Debt Servicing has negative and insignificant relationship with Real Gross Domestic Products. The unit root test found that the variables are stationary at first difference; the cointegration test revealed that the variables have long run relationship with the dependent variable. The study concludes that public debt have significant relationship with Nigerian economic performance. It therefore recommends that public debt in Nigeria should be judiciously used and accounted for to achieve set macroeconomic objectives.

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