Does Public Debt Matter for Economic Growth in Nigeria

Abstract

Nigeria, as an emerging economy, has experienced significant challenges in sustaining its economic growth trajectory. The issue of excessive borrowing has become a prominent concern in recent years. This work therefore examined the impact of excessive borrowing on Nigeria’s economic growth using data from 1980-2022. The Autoregressive Distributed Lag test method of co-integration was employed for the analysis of short-run and long-run impacts of excessive borrowing on economic growth. The long-run result endorsed the findings that excessive borrowing impacts negatively on the economic growth of Nigeria. Thus, excessive borrowing depreciates the real gross domestic product of Nigeria. The study recommends that government should embark on borrowing only when there is low interest rate. Also, diversification of the economy should be the priority of the government as this will deepen the revenue sources of the nation to avoid being tempted to borrow excessively. In addition, fiscal and monetary policies should be properly harmonized to tackle macroeconomic instability which has led to high inflation rate, high interest rate and high exchange rate.