An Empirical Investigation of Public Debt and Economic Development in Nigeria

The study empirically investigated public debt and economic development in Nigeria from 1981 to 2020. In specific terms, the study investigated the effect of domestic debt and external debt on economic development. The measure of economic development chosen for the study was per capita income. We obtained the data for this study from secondary sources which include World Bank World Development Indicator (WDI), United Nations Conference on Trade and Development (UNCTAD) and Central Bank of Nigeria (CBN) Statistical Bulletin. The statistical tools of unit root, cointegration and autoregressive distributed lag (ARDL) method were used in analyzing the data. With secondary data, the variables are found to be of mixed order of integration and, therefore, the ARDL model is the parameter estimator. Our cointegration result verified long run relationship exist among the domestic debt, external debt, population growth, debt, servicing, investment and economic development. The empirical result of the ARDL estimation showed that domestic debt had positive sign and significant with economic development in the long run. Again, investment and population are both positive and had significant effect on economic development in the long run. Also, external debt and debt servicing had insignificant effect on economic development. Thus, the study concluded that, domestic borrowing, investment spending and population growth are the major factors affecting economic development in Nigeria. The findings suggest that fiscal authorities should fund development projects using domestic borrowing and encourage investment in the productive industries through the design and implementation of structural policies.