External debt, domestic debt, external debt servicing and economic growth in Nigeria

Abstract

This study examines the impact of public debt on Nigeria’s economic growth. The objectives are to ascertain the impact of external debt (ED), domestic debt (DD) and external debt servicing (EDS) on Nigeria’s economic growth proxied by real gross domestic product (GDP). The study employed the ex post facto research design, while annual time series data for each of the variables were sourced from the Central Bank of Nigeria statistical bulletin for the period 1991 to 2022. The estimation techniques utilised in the study include correlation test, Augmented Dickey-Fuller unit root test, ARDL Bounds test, and the Bruesch-Godfrey LM test for autocorrelation. Findings of the Augmented Dickey-Fuller unit root test indicates that GDP and DD were stationary at level, while ED and EDS became stationary after first difference. The result of the ARDL bounds test revealed that the variables are cointegrated in the long run as the F-statistic value of 6.596 is greater than the upper critical bound value of 4.35. Further findings revealed that in the long-run, only DD has a significant positive impact on GDP. Result of the coefficient of determination suggests that the variables fitted in the model explained about 66.87 percent of the behaviour of GDP in the period under review. Also, the Durbin Watson statistic of 2.02 suggests that the model is free of serial correlation. The study therefore, recommended among others that the Nigerian government should focus more on domestic sources, as the major source of public debts.