Public Debt and Poverty in Nigeria: The Role of Governance Quality

ABSTRACT Borrowing by countries to improve growth may not be a sufficient condition for poverty alleviation and sustainable development, particularly if not combined with an effective and efficient system of governance. This article investigates the effect of public debt on growth and poverty level while considering the influence of governance quality in Nigeria between 1990 and 2020. Using the autoregressive distributive lags (ARDL) techniques, the result shows that public debt is negatively related to growth. While there is a negative relationship between domestic debt and poverty, external debt and debt service (DEBTSER) positively impact poverty. Also, bad governance in previous years contributes to increased poverty in Nigeria. This study suggests that the government needs to efficiently coordinate borrowed funds for growth-enhancing outcomes. More importantly, the government should boost alternatives to borrowing, for example, by diversifying the economic base of the country.