Public Debt and Economic Growth in Nigeria

This paper used public debt to investigate the impact of public debt on economic growth in Nigeria from 1992 to 2024. In particular, the paper explored the impacts of external debt ratio (EDTR), domestic debt ratio (DDTR), debt servicing ratio (DTSR) and exchange rate (EXR) on real gross domestic product (RGDP) and the compound effect. The research design was ex post facto while the secondary time-series data were obtained annually from the Central Bank of Nigeria, Debt Management Office, National Bureau of Statistics, and the public-debt series of the underlying study. The descriptive statistics, correlation analysis, variance inflation factor diagnostics, Augmented Dickey-Fuller unit-root testing, Engle-Granger cointegration testing, ordinary least squares regression, Jarque-Bera normality testing, Breusch-Pagan and White heteroscedasticity tests, heteroscedasticity-consistent estimation, ARDL bounds testing, dynamic OLS, and an error-correction specification was used to analyse the data. The results of separate OLS showed that EDTR had a negative and significant relationship (Coeff. = 557.420; p = 0.0001), DDTR had a positive and significant relationship (Coeff. = 557.420; p = 0.0001), DTSR had a negative and significant relationship (Coeff. = -0.870; p < 0.0001), EXR had a positive and significant relationship (Coeff. = 125.156; p < 0.0001). The identified joint model kept EDTR, DTSR and EXR and was jointly significant (F = 53.727; p < 0.0001) and accounted for 84.75% of the variation in RGDP with an adjusted R-squared of 0.8317. The three regressors were significant in the presence of heteroscedasticity-consistent standard errors. No cointegration was found in the Engle-Granger test in the logged specification, while the parsimonious ARDL bounds statistic was greater than the 5% upper bound, suggesting mixed long-run evidence. The paper found that the composition and servicing burden of public debt was an important factor in Nigeria's growth performance, and suggested more robust management of the debt composition, efficient utilization of borrowed funds, better planning of debt repayments and exchange-rate policies that would reduce foreign-currency debt service pressures.