IDEAS home Printed from https://ideas.repec.org/a/vrs/timjeb/v16y2023i1p1-24n1001.html
   My bibliography  Save this article

Public Debt and Economic Growth in Nigeria: A Consideration of New Evidence

Author

Listed:
  • Onyenwife Kingsley C.

    (Department of Economics, Chukwuemeka Odumegwu Ojukwu University, Igbariam, Nigeria)

  • Ezeanyeji Clement I.

    (Department of Economics, Chukwuemeka Odumegwu Ojukwu University, Igbariam, Nigeria)

  • Ekesiobi Chukwunonso

    (Department of Economics, Chukwuemeka Odumegwu Ojukwu University, Igbariam, Nigeria)

Abstract

The discussion surrounding the connection between public borrowing and economic expansion has persistently endured without abating. While debt desirability proponents argue that public debt is growth-enhancing, others argue that public debt does more harm than good to the economy. In recent times, the increase in public debt in Nigeria continues to raise concerns regarding its desirability. Although several studies have been carried out in this regard, there is hardly any study that examines the public debt-growth nexus in the context of the tradable and non-tradable sectors. Second, there is hardly any study that disaggregates bank-sourced debt from non-bank-sourced debt. Thus, the study aimed to achieve two-pronged research objectives: To appraise the implications of public debt on the economic growth in the tradable sector of the Nigerian economy and to analyze the effect of public debt on the economic growth in Nigeria’s nontradable sector. This study spans from 1981 to 2020. Using the Generalized Linear Model (GLM), the following conclusions are made. Initially, different elements of public debt have varying impacts on the growth of the tradeable sector. External debt and debt obtained from non-bank sources positively drive the growth of the tradable sector. However, debt acquired from banks and the associated servicing costs hurt the growth of the tradeable sector. Furthermore, the different components of public debt have varying impacts on the growth of the non-tradable sector. Specifically, foreign debt and debt obtained from non-bank sources have a significant positive influence on the growth of the non-tradable sector. The influence of debt acquired from banks on the nontradable sector is positive but insignificant. However, similar to the tradable sector, the servicing of debt undermines the growth of the non-tradable sector. Policy insights were provided in line with the study’s findings.

Suggested Citation

  • Onyenwife Kingsley C. & Ezeanyeji Clement I. & Ekesiobi Chukwunonso, 2023. "Public Debt and Economic Growth in Nigeria: A Consideration of New Evidence," Timisoara Journal of Economics and Business, Sciendo, vol. 16(1), pages 1-24.
    • Handle: RePEc:vrs:timjeb:v:16:y:2023:i:1:p:1-24:n:1001
    DOI: 10.2478/tjeb-2023-0001
    as

    Download full text from publisher

    File URL: https://doi.org/10.2478/tjeb-2023-0001
    Download Restriction: no
    File URL: https://libkey.io/10.2478/tjeb-2023-0001?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Chukwunonso Ekesiobi & Stephen K. Dimnwobi, 2020. "Economic Assessment of the Igbo Entrepreneurship Model for Entrepreneurial Development in Nigeria: Evidence from Clusters in Anambra State," Research Africa Network Working Papers 20/085, Research Africa Network (RAN).
    2. Adepoju, Adenike Adebusola & Salau, Adekunle Sheu & Obayelu, Abiodun Elijah, 2007. "The Effects of External Debt Management on Sustainable Economic Growth and Development: Lessons from Nigeria," MPRA Paper 2147, University Library of Munich, Germany.
    3. Mohammad Mafizur Rahman & Rezwanul Hasan Rana & Suborna Barua, 2019. "The drivers of economic growth in South Asia: evidence from a dynamic system GMM approach," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 46(3), pages 564-577, August.
    4. Kent Eliasson & Pär Hansson, 2016. "Are workers more vulnerable in tradable industries?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 152(2), pages 283-320, May.
    5. Dimnwobi, Stephen Kelechi & Madichie, Chekwube V. & Ekesiobi, Chukwunonso & Asongu, Simplice A., 2022. "Financial development and renewable energy consumption in Nigeria," Renewable Energy, Elsevier, vol. 192(C), pages 668-677.
    6. K. M. Guei, 2019. "External Debt and Growth in Emerging Economies," International Economic Journal, Taylor & Francis Journals, vol. 33(2), pages 236-251, April.
    7. Markus Ahlborn & Rainer Schweickert, 2018. "Public debt and economic growth – economic systems matter," International Economics and Economic Policy, Springer, vol. 15(2), pages 373-403, April.
    8. Chukwuebuka Bernard Azolibe & Stephen Kelechi Dimnwobi & Chidiebube Peace Uzochukwu-Obi, 2022. "The Determinants of Unemployment Rate in Developing Economies: Does Banking System Credit Matter?," Working Papers 22/044, European Xtramile Centre of African Studies (EXCAS).
    9. Stephen Taiwo Onifade & Savaş Çevik & Savaş Erdoğan & Simplice Asongu & Festus Victor Bekun, 2020. "An empirical retrospect of the impacts of government expenditures on economic growth: new evidence from the Nigerian economy," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 9(1), pages 1-13, December.
    10. Festus, Gift Emmanuel & Saibu, Muibi Olufemi, 2019. "Effect of external debt on Nigerian Economy: Further evidences," MPRA Paper 92704, University Library of Munich, Germany.
    11. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
    12. Olugbenga Onafowora & Oluwole Owoye, 2019. "Public debt, foreign direct investment and economic growth dynamics," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 14(5), pages 769-791, March.
    13. Waliu Olawale Shittu & Sallahuddin Hassan & Muhammad Atif Nawaz, 2018. "The nexus between external debt, corruption and economic growth: evidence from five SSA countries," African Journal of Economic and Management Studies, Emerald Group Publishing Limited, vol. 9(3), pages 319-334, July.
    14. Krugman, Paul, 1988. "Financing vs. forgiving a debt overhang," Journal of Development Economics, Elsevier, vol. 29(3), pages 253-268, November.
    15. Phelps, Edmund S. & Shell, Karl, 1969. "Public debt, taxation, and capital intensiveness," Journal of Economic Theory, Elsevier, vol. 1(3), pages 330-346, October.
    16. Chukwuebuka Bernard Azolibe & Stephen Kelechi Dimnwobi & Chidiebube Peace Uzochukwu-Obi, 2022. "The determinants of unemployment rate in developing economies: does banking system credit matter?," Journal of Economic and Administrative Sciences, Emerald Group Publishing Limited, vol. 41(1), pages 300-319, July.
    17. Arčabić Vladimir & Tica Josip & Lee Junsoo & Sonora Robert J., 2018. "Public debt and economic growth conundrum: nonlinearity and inter-temporal relationship," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 22(1), pages 1-20, February.
    18. Chukwuebuka Bernard Azolibe & Stephen Kelechi Dimnwobi & Chidiebube Peace Uzochukwu-Obi, 2022. "The Determinants of Unemployment Rate in Developing Economies: Does Banking System Credit Matter?," Working Papers of the African Governance and Development Institute. 22/044, African Governance and Development Institute..
    19. Wang, Zhaohua & Asghar, Muhammad Mansoor & Zaidi, Syed Anees Haider & Nawaz, Kishwar & Wang, Bo & Zhao, Wehui & Xu, Fengxing, 2020. "The dynamic relationship between economic growth and life expectancy: Contradictory role of energy consumption and financial development in Pakistan," Structural Change and Economic Dynamics, Elsevier, vol. 53(C), pages 257-266.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Uju Regina Ezenekwe & Eze A. Eze & Geraldine Ejiaka Nzeribe & Maria Chinecherem Uzonwanne, 2023. "Winning the Environmental Sustainability Crusade: Do Agricultural Development and Public Debt Mitigate Environmental Pollution in Nigeria?," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(9), pages 1481-1497, September.
    2. Manamba EPAPHRA & William MESIET, 2021. "The external debt burden and economic growth in Africa: a panel data analysis," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania / Editura Economica, vol. 0(2(627), S), pages 175-206, Summer.
    3. Abdul Jalil, 2020. "Debt Sustainability: Economic Growth is the Panacea," PIDE Knowledge Brief 2020:19, Pakistan Institute of Development Economics.
    4. Onyekachukwu Ernest Ebenebe & Ifunanya Miracle Ejimgini & Uju Regina Ezenekwe & Christopher U. Kalu, 2024. "Bridging Health Divides: Remittances and Health Expenditure in Nigeria[1]," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(9), pages 24-41, September.
    5. Majed Alharthi & Md Mazharul Islam & Hawazen Alamoudi & Md Wahid Murad, 2024. "Determinants that attract and discourage foreign direct investment in GCC countries: Do macroeconomic and environmental factors matter?," PLOS ONE, Public Library of Science, vol. 19(2), pages 1-28, February.
    6. Bakari, Sayef, 2024. "Assessing the Impact of Domestic Investments and CO2 Emissions on Economic Growth in Sub-Saharan Africa: A Comprehensive Study (1990-2022)," MPRA Paper 120370, University Library of Munich, Germany.
    7. Haytham Y.M. Ewaida, 2017. "The Impact of Sovereign Debt on Growth: An Empirical Study on GIIPS versus JUUSD Countries," European Research Studies Journal, European Research Studies Journal, vol. 0(2A), pages 607-633.
    8. Ikonen, Pasi, 2010. "Effect of finance on growth through more efficient utilization of technological innovations," Bank of Finland Research Discussion Papers 21/2010, Bank of Finland.
    9. Aruna Gounder & Priteshni Chand & Avineel Kumar, 2024. "Government Debt and Foreign Aid: Do They Matter for Economic Growth in Small Island Economies? Empirical Evidence from the Pacific Islands," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(2), pages 8327-8348, June.
    10. Philipp Heimberger, 2023. "Do higher public debt levels reduce economic growth?," Journal of Economic Surveys, Wiley Blackwell, vol. 37(4), pages 1061-1089, September.
    11. repec:zbw:bofrdp:2010_021 is not listed on IDEAS
    12. Abida Yousaf & Tahir Mukhtar, 2020. "External Debt and Capital Accumulation Nexus: Evidence from Pakistan," The Pakistan Development Review, Pakistan Institute of Development Economics, vol. 59(1), pages 29-44.
    13. Ly Dai Hung, 2021. "External Debts and Economic Growth when Debt Rating Matters," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 12(03), pages 1-26, October.
    14. Sisira R. N. Colombage & Suborna Barua & Madurika Nanayakkara & Udari N. Colombage, 2023. "COVID-19 Effects on Public Finance and SDG Priorities in Developing Countries: Comparative Evidence from Bangladesh and Sri Lanka," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 35(1), pages 85-111, February.
    15. Dmytro Zhuravlov & Mykhailo Prokhorenko & Tamara Chernadchuk & Vitaliy Omelyanenko & Valentyna Shevchenko, 2021. "The impact of the public debt of a country on the sustainable development of entrepreneurship," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 8(4), pages 654-667, June.
    16. Ben Mimoun Mohamed, 2013. "Assessing the Short‐ and Long‐run Real Effects of Public External Debt: The Case of Tunisia," African Development Review, African Development Bank, vol. 25(4), pages 587-606, December.
    17. Qianqian Wu & Rong Wang, 2023. "Do Environmental Regulation and Foreign Direct Investment Drive Regional Air Pollution in China?," Sustainability, MDPI, vol. 15(2), pages 1-16, January.
    18. Simplice A. Asongu & Samba Diop, 2022. "Resource Rents and Economic Growth: Governance and Infrastructure Thresholds," Working Papers of the African Governance and Development Institute. 22/072, African Governance and Development Institute..
    19. Nitin Arora & Ishfaq Ali Ganaie, 2023. "How Much Technically Efficient Is The South Asian Region? An Intra-Regional Comparison Among Its Affiliates," South Asia Economic Journal, Institute of Policy Studies of Sri Lanka, vol. 24(1), pages 20-40, March.
    20. Simplice A. Asongu & Samba Diop & Ekene ThankGod Emeka & Amarachi O. Ogbonna, 2024. "The role of governance and infrastructure in moderating the effect of resource rents on economic growth," Working Papers of the African Governance and Development Institute. 24/027, African Governance and Development Institute..
    21. Dan Gabriel Dumitrescu & Alexandra Horobe? & Cristiana Doina Tudor & Lucian Belascu, 2023. "Renewables and Decarbonisation: Implications for Energy Policy in the European Union," The AMFITEATRU ECONOMIC journal, Academy of Economic Studies - Bucharest, Romania, vol. 25(63), pages 345-345, April.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • H74 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Borrowing
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vrs:timjeb:v:16:y:2023:i:1:p:1-24:n:1001. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.sciendo.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.