Impact of Public Debt on Economic Growth in Nigeria: Evidence from Autoregressive Distributed Lag Model

This paper examined the impact of public debt on economic growth in Nigeria from 1990 to 2023. The objectives are to determine the impact of domestic debt, external debt and public debt service payments on gross domestic product (GDP) in Nigeria. The Augmented Dickey-Fuller unit root test indicates that the variables are stationary at levels, I(0) and at order one, I(1). The study applied the autoregressive distributed lag (ARDL) model to secondary data sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin, National Bureau of Statistics (NBS), and Debt Management Office (DMO). The ARDL bounds test to cointegration indicates existence of a long-run relationship among the variables which led to estimation of both short-run and long-run results. Findings reveal that domestic debt and external debt made negative and insignificant impact on GDP whereas public debt service payments made positive and significant impact on GDP in both the short-run and the long-run. Control variables of gross fixed capital formation, total labour force participation rate and inflation rate produced mixed results in both periods. This suggests that Nigeria’s reliance on public debt-both domestic and external borrowings has been detrimental to its economic performance, primarily due to mismanagement of borrowed funds. The paper recommends that public debt should be productively utilized, there should be reforms in debt management to ensure efficient allocation of borrowed funds to productive sectors, and a reduction in reliance on external financing to achieve sustainable economic growth and development.