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The impact of government debt on economic growth in Nigeria

Author

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  • Abdulkarim Yusuf
  • Saidatulakmal Mohd
  • David McMillan

Abstract

This study investigated the effect of government debt on Nigeria’s economic growth using annual data from 1980 to 2018 and the Autoregressive Distributed Lag technique. The empirical results showed that external debt constituted an impediment to long-term growth while its short-term effect was growth-enhancing. Domestic debt had a significant positive impact on long-term growth while its short-term effect was negative. In the long term and short term, debt service payments led to growth retardation confirming debt overhang effect. The findings suggested that the government should direct the borrowed funds to the diversification of the productive base of the economy. This will improve long-term economic growth, expand the revenue base and strengthen the capacity to repay outstanding debts when due. Fiscal improvements that encourage domestic resource mobilization, efficient debt management strategies and reliance on domestic debt rather than external debt for increased deficit financing to engender greater growth are the main contribution of the study.

Suggested Citation

  • Abdulkarim Yusuf & Saidatulakmal Mohd & David McMillan, 2021. "The impact of government debt on economic growth in Nigeria," Cogent Economics & Finance, Taylor & Francis Journals, vol. 9(1), pages 1946249-194, January.
    • Handle: RePEc:taf:oaefxx:v:9:y:2021:i:1:p:1946249
    DOI: 10.1080/23322039.2021.1946249
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    Cited by:

    1. Favour C. Onuoha & Stephen K. Dimnwobi & Kingsley I. Okere & Chukwunonso Ekesiobi, 2023. "Sustainability Burden or Boost? Examining the Effect of Public Debt on Renewable Energy Consumption in Sub-Saharan Africa," Working Papers of the African Governance and Development Institute. 23/031, African Governance and Development Institute..
    2. Elena Alina OLARU (COLBEA), 2023. "Effects of IPSAS Adoption in Public Institutions in Romania on the Quality of Financial Reporting," CECCAR Business Review, Body of Expert and Licensed Accountants of Romania (CECCAR), vol. 4(3), pages 62-72, March.
    3. Okere, Kingsley Ikechukwu & Dimnwobi, Stephen Kelechi & Ekesiobi, Chukwunonso & Onuoha, Favour Chidinma, 2023. "Turning the tide on energy poverty in sub-Saharan Africa: Does public debt matter?," Energy, Elsevier, vol. 282(C).
    4. Ikram Benheddi & Mohammed Kamel Si, 2023. "The Effects of Fiscal Dominance on Monetary Policies in Algeria Amidst COVID-19," Zagreb International Review of Economics and Business, Sciendo, vol. 26(2), pages 77-96.
    5. Abdulkarim Yusuf & Saidatulakmal Mohd, 2024. "Investigating the Asymmetric Impact of Public Debt on Economic Growth in Nigeria," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(2), pages 9452-9481, June.
    6. Oluseyi Omosuyi, 2024. "Public And Publicly Guaranteed External Debt, Debt Servicing And Investment In Emerging Economies," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 69(240), pages 31-56, January –.
    7. Yeboah Evans, 2024. "The relationship between foreign direct investment and trade openness: Evidence from six developed economies," Economic and Regional Studies / Studia Ekonomiczne i Regionalne, Sciendo, vol. 17(2), pages 222-250.

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