Excessive Internal Borrowings and Debt Management: Implications on the Nigerian Economy

Abstract

This study empirically reviewed the implications of excessive internal borrowing and debt management with particular emphasis on Nigeria. The study covered the period from 2000 to 2020. The study examined the concept, growth, and causes of Nigeria’s domestic debt problem. It went further to study the strategies employed by government in managing domestic debt in Nigeria as well as the dominant factors that hampered domestic debt management which are poor management of borrowed funds, high cost of servicing domestic debt, excessive borrowings and rising budget deficit. Data were collected majorly from secondary source which includes Central Bank of Nigeria statistical bulletin, Debt Management Office publications and relevant journals and textbooks on financial system. Hypothesis were formulated, examining the impact of internal borrowings on Nigeria’s economy, it’s relationship with domestic debt servicing and its effect on rising budget deficit, and were tested and analyzed with the Regression analysis, correlation analysis, and the probability significance value using the Statistical Package for Social Science (SPSS) version 17. After the analysis, the work revealed that internal borrowings have affected the growth of the economy negatively, a positive relationship exists between domestic debt servicing and internal borrowings and that rising budget deficit has a negative impact on domestic debt. Based on these findings, the study recommends among others that the Federal Government should lay down well considered guidelines for internal loan, defining the purpose, duration, negotiation fee and conditions under which it can approve and guarantee a loan. Also limit domestic borrowings and mobilize untapped domestic resources as well as curb corruption in the country as borrowed funds are either misapplied or embezzled. If the Government and Debt Management Office employ the recommendations of this research, it would go a long way in boosting economic growth and development and to a positive extent ensure improvement in the overall economy of Nigeria.