Public Debt and Economic Growth in Nigeria
Elom- Obed Ozioma Favour, Odo Stephen Idenyi, Elom Obed Oge, I. Anoke Charity
Asian Research Journal of Arts & Social Sciences · pp. 1–16 · Published 28 Oct 2017
10.9734/ARJASS/2017/36095Abstract
This study empirically analyzed the relationship between public debt and economic growth in Nigeria from 1980-2015. The study adopted Vector Error Correction Model (VECM) approach of econometric data analysis. The variables used in the study include real gross domestic product (RGDP), foreign debt, domestic debt and domestic private savings. The results of the study indicated that: (i) External debt have significant negative impact on economic growth within the period under study. (ii) Domestic debt (DMD) has significant negative relationship with economic growth within the period under consideration. (iii) External debt and domestic debt granger cause RGDP in Nigeria with causality running from external debt and domestic debt to RGDP. The implication of this result is that the negative correlation between debt stocks (external debt and domestic debt) and economic growth which is contrary to apprior expectation may be highlighting the misappropriation and wrong application (corrupt practices) of the borrowed funds. Based on findings, the study recommends therefore that (i) Government should reduce external debt and the ones obtained should be strictly used for purposes intended to ensure positive effect. (ii) Government should cut down on domestic borrowing and ensure that the already borrowed funds are applied for purposes intended to ensure positive effect and through growth. (iii) With the evidence of negative causality running from both external and domestic debt stock to economic growth (RGDP) suggests that government should cut down in both borrowings to ensure economic stability and sustainable growth.
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