Juxtaposing Government Borrowings and the Nigerian Financial Environment

Abstract

Government borrowing is desirable when it propels economic growth. Banks are the key players in Nigeria financial environments mobilising funds for the government via domestic and external debts. This study examined how government borrowings have impacted on the Nigerian financial environment. The study is archival, utilising data from the Central bank of Nigeria (CBN) and Nigeria Bureau for Statistics (NBS) bulletins. A Time Series data of 36 years-period (1981-2016), were collected. Multiple regression tool with Ordinary Least Squares (OLS) method of estimation of parameters was used to analyse the data. The results showed a linear relationship between money supply and foreign and domestic debts ( R2=0.984) with foreign and domestic debts explaining 98% of the variation in money supply; and correlation value indicating a very strong positive significant relationship between the interest rate and domestic and foreign debts (r=0.992; p<0.05).Thus the study among others recommended servicing of debts on a persistent basis, so as to avoid recapitalization of arrears which may mount pressure on the nation’s debt stock.