Impact Public Debt on Economic Development in Nigeria: 1986 - 2017

Abstract

The study examined the impact of public debt on economic development in Nigeria for the period of 1986 to 2017. Three research questions and objectives guided the study. Vector Error Correction Model (VECM) technique and Johansen Co-integration test were employed for testing the hypotheses of the study. The VECM analysis results shows that Domestic debt had a positive impact on economic development in the short run, while in the long-run, domestic debt impacted negatively on economic development in Nigeria. The analysis shows that external debt impacted positively on GDP per capita income, indicating that it tends to contribute largely to economic development than domestic debt in Nigeria. The co-integration test results show that there exist a long-run relationship between public debt and economic development in Nigeria. Hence, the study recommends that policy makers like the Debt Management Office (DMO) should be seen to support the government in financing infrastructural development in production sectors and other priority areas of the economy, in order to promote increase in the volume of commodities exported from the country so as to boost earnings from foreign exchange, improve the living standard of people and eradicate poverty. Also, new debt management strategy should be created to contain guidelines to encourage export promotion and import substitution, as this would lead to increase in productivity level and promoting foreign exchange earnings, among others.