Macroeconomic determinants of Nigeria's domestic debt

Motivated by the rising debt profile of Nigeria and the reported economic quagmire the nation is facing, this study empirically investigates the macroeconomic determinant of Nigeria’s domestic debt between 1985 to 2021.Population, inflation, government expenditure and gross domestic product constitutes the independent variables, whereas aggregate domestic debt formed the dependent variable. However, these were proxied with their growth rates. It utilized logged variant of secondary data obtained from Central Bank of Nigeria (CBN) Statistical Bulletin and Nigeria Bureau of Statistics (NBS). The studyis based on Keynes general theory and Malthus population theory. E-views 12 was employed for data analysis. Initially, graphical trend of data was used to analyze the data. At first stationarity test was done and the data were stationary at order 1 (first difference) thereby necessitating the Johansen cointegration test from which a long-term relationship was obtained. However, full rank was observed which gave rise to the conversion of the study data to its natural logged form and the beginning of the process all over.In furtherance, stationarity test was engaged in at order zero (levels) and the data were stationary. Hence, ordinary least squares (OLS) test was employed as a tool for analytical purpose.Our OLS test revealed the following: (i) positive and significant relationship between population growth rate (PGR) and aggregate domestic debt growth rate (ADDGR), (ii) negative and significant relationship between inflation rate and aggregate domestic debt growth rate (ADDGR) in Nigeria, (iii) positive and insignificant relationship for both government expenditure growth rate (GEGR), gross domestic product growth rate (GDPGR) and Nigeria’s aggregate domestic debt growth rate (ADDGR). The OLS test further showed that 68.72% variation in the study’s dependent variable (aggregate domestic debt) was determined by the choice macroeconomic determinants of the study (i.e. population, inflation, government expenditure and gross domestic product).Causality test was conducted and the result obtained tells that non among the choice determinants promoted Nigeria’s aggregate domestic debt, instead aggregate domestic debt promoted inflation. Based on our findings we recommended the following; (i) Nigeria’s government should encourage population control, (ii) inflation should be targeted the government’s monetary policy,(iii) government should reduce its expenditure by ensuring that prudence is exercised in its spending pattern so as to reduce its domestic debt, (iv) further related research should be engaged in while incorporating those macroeconomic variables that were not captured on this study.