Accounting for Borrowing and Economic Performance in Nigeria

Abstract

Accounting for public borrowing and economic performance has been under constant investigation. This study examined the impact of public borrowing on economic performance of Nigeria between 1981 to 2021. The study adopted purposive sampling technique and analyzed using robust ordinary least square (ROLS). The independent variables are, Federal government domestic debt (FDD), Federal government foreign debt (FGFD), cost of servicing debt (CSD), Federal government total expenditure (FGTE) is proxy for dependent variable while, Federal government retain revenue (FGRR) is proxy for control variable. The study reveals that that of FGRR, CSD, FGFD and FGDD have positive and significant influence on the federal government total expenditure. The study was theoretically anchored on Dual Gap Analysis Theory, Adam Smith Theory on Debt and The Ricardo Theory of Public Debt. The study then concludes that Nigeria’s total expenditure has risen astronomically through domestic debt, foreign debt, government retained earnings and debt servicing. The study then recommends very strong internal control should be enforced over utilization of borrowed fund, domestically or externally, as well as investigation of the internal control process of borrowing in Nigeria. Again, debt should be reduced so as to reduce the cost burden of servicing it as debt overhang is imminent in Nigeria. The study recommends the investigation of the internal control process of borrowing in Nigeria for further study.