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Public Investment in Nigeria. Does External Debt Matter?

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  • Ibrahim Mohammed Adamu

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Abstract

This paper investigates the effects of external debt on public capital investment in Nigeria from 1970 to 2013 using autoregressive distributed lag (ARDL) bound testing approach. The empirical results reveal that external debt and debt service exert a negative impact on public capital investment, but the current real GDP is positive. In general, our empirical evidence suggests that external debt does not influence public investment over the period under study. At longer horizon, it is confirmed that the nature of poor domestic savings and investment causes higher debt service payments and crowd out available resources for investment in economic and social sectors. The study, therefore, suggests that the policy makers should adhere strictly to the appropriate use of debt through efficient investment, so that the debt service payments should not exceed the country’s payment capacity.

Suggested Citation

  • Ibrahim Mohammed Adamu, 2016. "Public Investment in Nigeria. Does External Debt Matter?," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 2(4), pages 120-138, December.
  • Handle: RePEc:khe:scajes:v:2:y:2016:i:4:p:120-138
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    More about this item

    Keywords

    External debt; debt service; FDI; public capital investment; Nigeria;

    JEL classification:

    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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