Domestic Debt and Economic Growth in Nigeria: Empirical Evidence from 1981 to 2021

Abstract

This study examines the impact of domestic debt on economic growth in Nigeria using annual data from 1981 to 2021. The model for the work was built using the Neoclassical growth theory and Harrod Domar model; which poses as a motivation to this study. The study adopted the autoregressive redistributed lag model (ARDL), which shows that there is a long-run relationship between domestic debt and economic growth. Data for the study was sourced from the Central Bank of Nigeria's statistical bulletin (2022), the World Bank (2022) and Debt Management Database (2022). The variables of the model include; interest rate, federal government debt, state government debt, Treasury bill and total savings, as independent variables, while economic growth as dependent. The findings revealed that state government debt, treasury bills and total savings had a significant impact on economic growth for the period under review in Nigeria. Based on the findings, the study recommends that Government should ensure proper, efficient and effective use of both state and federal government borrowings, and money raise from treasury bills sales. This would help to provide the basic infrastructures needed for investments to thrive, and as such, the economy will grow.