Effect of Public Debt on Nigeria Economic Growth

This study investigates the effect of public debt on Nigeria’s economic growth between 2004 and 2023. The main objective is to examine how external debt, domestic debt, and debt servicing influence the country’s economic performance. The study relies entirely on secondary data sourced from the Central Bank of Nigeria (CBN). The analysis was conducted using the Auto-Regressive Distributed Lag (ARDL) model after testing for the stationarity of the variables. The findings reveal that external debt has a negative effect on economic growth, while domestic debt shows a growth-enhancing relationship with the economy. Debt servicing, although showing a reducing effect on growth, was not statistically strong enough during the period under review to draw firm conclusions. The study concludes that the structure and composition of Nigeria’s public debt significantly influence its economic trajectory. Accordingly, it recommends that the government exercise caution in external borrowing and ensure that such loans are directed toward economically productive projects. Domestic debt should be prioritised for financing key sectors like infrastructure, education, and health. Additionally, debt management practices should be strengthened to ensure efficiency, and debt servicing should be reviewed to prevent the crowding-out of essential development spending. All borrowed funds should be linked to projects with measurable developmental outcomes to promote sustainable economic growth.