Effect of Public Debt on Poverty and Economic Growth of Nigeria (1981-2019)

Abstract

The research in focus aimed to investigate the interplay between public debt, poverty, and economic growth in Nigeria during the period spanning from 1981 to 2019. The specific objective was to assess the relationship between these variables within the Nigerian context during this timeframe. To conduct this analysis, time series data were employed, sourced from the Central Bank of Nigeria’s annual statistical bulletin and World Bank development indicators. Initially, unit root tests, such as the Augmented Dickey-Fuller (ADF) and Philip Perron (PP) tests, were executed to establish the stationarity of the variables. These tests indicated that, in model one, all variables exhibited stationarity at order one (1) and order zero (0), whereas in model two, all variables were stationary at order one (1). Subsequently, the Auto Regressive Distributive Lag Model (ARDL) was employed to conduct short-run analysis and reveal the long-run coefficients in model one. In model two, the Error Correction Model (ECM) was utilized to investigate the data and assess the speed of adjustment from the short run to the long-run equilibrium state. The Granger causality test was also applied to determine causality relationships among the variables and to discern the direction of causality. The findings of this study indicate that external debt exhibited a negative impact in the short run but a positive impact in the long run on the Nigerian economy during the study period. Additionally, there was evidence of unidirectional causality between external debt and economic growth. Conversely, domestic debt exerted a negative influence on both short and long-term economic performance in Nigeria, with unidirectional causality established between domestic debt and economic growth. In light of these conclusions, the study recommends the implementation of effective debt management strategies by the government, especially concerning loan repayment. It is also suggested that loans acquired should be promptly channeled into viable investments aimed at enhancing the welfare of the populace and overall economic improvement.