Effect of Public Debt on Economic Development in Nigeria (2000 – 2023)

Abstract

The study examined the effect of public debt on economic development in Nigeria spanning from 2000 to 2023 with emphasis on the effect of domestic debt (DDEBT), bilateral debt (BDEBT), multilateral debt (MDEBT) and debt servicing (DEBSERV). The research adopted ex-post facto research design. Secondary data were collected from Debt Management Office (DMO), Central Bank of Nigeria Statistical Bulletin, United Nations Development Programme (UNDP) and National Bureau of Statistics (NBS). The econometric technique of multiple regression analysis, Augmented Dickey Fuller (ADF), Unit Root Test, Johansen Co-integration Test and Error Correction Model (ECM) were employed in the data analysis. The co-integration test showed that long-run equilibrium relationship exists among the variables. The findings from the data analysis showed that domestic debt has negative and insignificant effect on economic development in Nigeria. Bilateral debt has positive and non-significant effect on economic development in Nigeria. Multilateral debt has negative and non-significant effect on economic development in Nigeria while debt servicing has a positive and non-significant effect on economic development in Nigeria. The implication of the findings is that proper and judicious use of public debt affects positively on economic development in Nigeria. Based on the findings, the study therefore recommends that government should reduce the level of domestic debt accumulation. Government should acquire more bilateral loans that should be channeled into viable projects with high return on investment. Government should avoid acquiring multilateral loans because of their negative effect on the development of Nigerian economy. Debt servicing requirement should not be allowed to increase above the debt stock by regularly servicing the loan.