Effect of Public Debt on Economic Growth in Nigeria Nwala, Maureen Nneka
Abstract
Using the Autoregressive Distributed Lag (ARDL) method and regime-based breakpoint analysis, this study looked at how Nigeria's public debt, both foreign and domestic, affected the country's economic development from 1981 to 2023. The results showed that domestic debt stock had a positive and significant long-run impact on economic growth, whereas external debt stock had a negative but statistically negligible effect. Changes in foreign debt hurt GDP in the short term, but lagged effects showed that growth might happen later. The analysis found structural breakdowns that happened during important political and economic changes, such as the Structural Adjustment Programme and democratic shifts. This showed that the connection between debt and growth changed depending on the regime. For example, overseas debt only helped growth before the SAP period, whereas domestic debt hurt growth between 1986 and 2006, perhaps because of bad policies. These statistics show that the effect of debt on growth in Nigeria has changed over time. The study suggests that debt management solutions should be tailored to each situation. It emphasizes the need to develop the local debt market and borrow money from abroad wisely to meet the demands of productive investment, while also recognizing that governance and institutional quality are important aspects that can change the outcome.
Keywords
Public debtDomestic debtExternal debtEconomic growthNigeriaARDLRegime
References
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