Impact of Public Debt on Economic Growth in Nigeria: A Disaggregated Analysis

By: Blessing Nancy Udenta, Irene Ukamaka Nwiboko, Emeka Atuma

Pages: 247–266, Volume: 2, Number: 2

Published by: AEFUNAI Journal of Economics, Finance and Development Studies, Alex Ekwueme Federal University, Ndufu-Alike, 9/1/2025, 2025

ISSN (Electronic): 2536-6742

DOI: 10.48028/iiprds/aefunaijefds.v2.i2.13

Impact of Public Debt on Economic Growth in Nigeria: A Disaggregated Analysis

Abstract:

Since the economic recession of the early 1980s, Nigeria embarked on both domestic and foreign borrowing as a way to shore up funds for economic growth and to promote performances of other macroeconomic However, no significant improvement has been recorded on the side of economic growth and poverty reduction amidst a rising debt profile. Hence, this research work examined the impact of public debt on economic growth in Nigeria using data from CBN, and covering 1985 to 2020. Using gross domestic product as a proxy for economic growth, while domestic debt, external debt, and total debt servicing a measure of public debt profile, it was discovered that a mixed order of integration existed, hence we adopted the autoregressive distributed lag (ARDL) model. The results showed that external debt had a significant and positive impact on GDP in Nigeria. However, domestic debt had a positive and insignificant impact on GDP. It also showed that total debt servicing payment exerted negative and significant impact on GDP in the short-run and negative and insignificant impact on GDP in the long-run. Based on the findings, the study recommended for efficient utilization of domestic debt in financing fiscal deficits in Nigeria. This could be done by issuing more federal bonds, treasury bills, treasury certificates; the government should continue to utilize external debt in financing investment deficits in the economy as this can result to improvement in economic growth of the nation even in the long-run.

Keywords: Public debt, Economic growth, Disaggregated analysis, External debt, Domestic debt