Domestic debt and economic growth nexus in Nigeria: An ARDL approach

Abstract

This study examined the impact of domestic debt on economic growth in Nigeria for the period of 1980-2020 using autoregressive distributed lag (ARDL) model technique. Findings indicated that domestic debt has positive and significant impact on economic growth in the long run while interest rate and government capital expenditure on transfer were found to have a positive but insignificant impact on economic growth. Public debt servicing was found to have negative but significant impact on economic growth. In the short run, domestic debt, interest rate, and government capital expenditure on transfer were found to have negative and insignificant impact on economic growth while public debt servicing indicated positive but insignificant relationship. The study therefore recommends that borrowed fund should be channelled to productive sectors of the economy and more specifically in the real sector to create employment, reduce poverty and attract foreign direct investments.