Nigeria’s Domestic Public Debts and Economic Development

Opara Ihunna Victoria,Nzotta Samuel Mbadike,Kanu Success Ikechi

doi:10.18775/ijmsba.1849-5664-5419.2014.75.1001

Opara Ihunna Victoria, Nzotta Samuel Mbadike + Show 1 more

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https://doi.org/10.18775/ijmsba.1849-5664-5419.2014.75.1001

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Abstract

This study investigates the effect of Nigeria’s domestic public debt on economic development of Nigeria spanning from 1981-2018. This is in response to the doubts being raised in some quarters as to whether the continuous increase in domestic debt over the years has led to the economic development of Nigeria as the former has been known to influence the later if well harnessed and executed. The secondary data used in the study were sourced from Central Bank of Nigeria Statistical Bulletin, Debt Management Office of Nigeria, World Bank Development Indicators and United Nations Development Program. The study made use of Ordinary Least Square Regression tools to determine the statistical relationship between Nigeria’s domestic public debt profile and Human Development Index as well as private sector investment. The outcome of study in the first model showed that domestic debt servicing and state governments’ domestic debts are significantly related to economic development. On the other hand, Federal domestic debt and State domestic debt are significantly related to private sector investment. The study therefore recommends that government should be cautious in her domestic borrowing policy given that servicing debt always becomes a burden to the sustainability of economic gains, in addition to its tendency of crowding-out private sector investment in Nigeria.

Highlights

1.1 Background of the Study.To facilitate economic growth, developing nations like Nigeria are encouraged to borrow to beef up their limited stocks of capital and to bridge the domestic savings- investment gap
The results discovered that domestic debt had a linear and positive impact on private investment; external debt had a U-shaped impact on private investment; and private consumption expenditure had a negative impact on private investment
Nigerian economy has mostly been modeled and planned its fiscal policies leveraging on the support of borrowed funds

Summary

Introduction

1.1 Background of the Study.To facilitate economic growth, developing nations like Nigeria are encouraged to borrow to beef up their limited stocks of capital and to bridge the domestic savings- investment gap. There are several reasons why nations may need to borrow; one of such is to smoothen and hide fiscal deficits. This could spice up investments and accelerate economic process and development (Adam et al, 2016). The economy is expected to grow and bring about a timely settlement of debts so incurred. If this cycle is upheld and repeated overtime, growth will influence per capita income which is a condition for poverty reduction (Amakom, 2003).

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