JOURNAL REVIEW
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Olabisi Onabanjo University**We aren't endorsed by this school
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Economics
Date
Dec 18, 2024
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THE EFFECT OF GOVERNMENT DEBT ON ECONOMIC GROWTH IN NIGERIATajudeen Egbetunde(2012) studied Public Debt and Economic Growth in Nigeria.The paper examined the causal nexus between public debt and economic growth in Nigeriabetween 1970 and 2010 using a Vector Autoregressive (VAR). The findings of the VAR modelrevealed that there is a bi-directional causality between public debt and economic growth inNigeria. The paper concluded that public debt and economic growth have long run relationship,and they are positively related if the government is sincere with the loan obtained and use it forthe development of the economy rather than channel the funds to their personal benefit.Olanrewaju M. H. Ph.D1( 2015) studied Implications of External Debt on theNigerian Economy.This paper examines the effect of government debt on economic growth in Nigeria between 1986and 2015 – using the ordinary least square method. The study reveals that the impact ofgovernment debt on economic growth over the period under review is insignificant with externaldebt which has been enormous over the years contributing minimally to real gross domesticproduct. The findings of the study reveal that, if the course of consistent borrowing is not curbed,the economy will slump further: resorting to surplus budgeting, and igniting; increases inunemployment, decreases in total investment, falling reserves, increased exchange rate, higherinflation and consequently increased poverty. It is therefore recommended among others thatborrowing should be a last recourse by the government to revitalize the economy, and ifnecessary, the loans should be sourced within the economy so that when the principal andinterest on the loans are paid back, it will serve as a crowd-in-effect which in turn furtheraccelerates economic activities in the country. Also, other alternative sources of governmentrevenue especially taxation hitherto neglected should be explored to minimize dependence onborrowed funds to revamp the economy. Finally, power should be made stable so that the cost onindustries that depend on alternative power sources to thrive can be reduced. Thus, such moniescan be utilized for remunerative alternative employments.
James O. Babu, Symon Kiprop (2015) studied EFFECT OF DOMESTIC DEBT ONECONOMIC GROWTH IN THE EAST AFRICAN COMMUNITYThis study was based on the Solow growth model augmented for debt. Levin-Lin-Chu test (LLC)was used to investigate the properties of the data with respect to Unit roots. The Hausmanspecification test was used to select the panel fixed-effects model, which was corrected forheteroscedasticity. The results show that domestic debt has a positive significant effect on percapita GDP growth rate in the EAC. The policy implication is to promote sustainable levels ofdomestic borrowing to enhance growth.Adeniran O. I, John Abiodun(2015) studied EXTERNAL DEBT AND ECONOMICGROWTH IN NIGERIA.This research investigates the impact of external debt on economic growth in Nigeria from 1980-2014 using the Vector Error Correction model. The empirical findings through the impulseresponse analysis and variance decomposition have revealed that external debt service paymentnegatively impacts real GDP per capital growth in Nigeria significantly, signaling the existenceof the debt overhang impact on economic growth. Furthermore, the Granger Causality/Wald testrevealed a unidirectional causation from real GDP to external debt stock and from external debtservice payment to real GDP. It is recommended that external debt should be discouraged for itcannot be relied on by government for the promotion of economic growth because of itsretarding influence on growth. Other sources of revenue, such as taxation, and exports promotionshould be strengthened and focused on in order to generate the needed funds for the Nigeria’sindispensable expenditures to bring about the desired growth.Sunday N. Essien, Ngozi .T. I. Agboegbulem and Michael K. Mba (2016) studied AnEmpirical Analysis of the Macroeconomic Impact of Public Debt in Nigeria.This paper examines the impact of public sector borrowings on prices, interest rates, and outputin Nigeria. It utilized a Vector Autoregressive framework,the Granger causality test, impulseresponse, and variance decomposition of the various innovations to study the impact. It foundthat shock to externaldebt stock increases prime lending rate, but with a lag. However, the levelofexternal and domestic debt over the period of this study had no significant impact on thegeneral price level and output.
Habeeb Bello (2017) studied The Impact of Public Debt on Economic Growth inNigeria.The methodology adopted in this study is the Ordinary Least Squares because it providessatisfactory results for estimates of structural parameters. This method involves decisiononwhether the parameters are statistically significant and theoretically meaningful. It alsoverifies the validity of estimates and whether they actually represent economic theory.The results of the study revealed that there exists a long-run relationship between external debtstock, domestic debt stock, consumer price index, prime lending rate and gross domestic productper capita in Nigeria. Also, it was discovered that external debt stock (EXD) have insignificantnegative relationship with real gross domestic product (RGDP) in Nigeria. However, domesticdebt stock (DMD) has a positive and highly significant relationship with real gross domesticproduct (RGDP) in Nigeria. The findings from study reveal that has reviewed in the empiricalliterature above, debt becomes a burden when improperly managed. The result of the findings isnot quite different from the other studies reviewed with exception of few who viewed debt hasfurther draining developing countries of their growth capacity. This study examined the impactof external debt on economic growth in Nigeria. The study sought out to find a significant longrun and causal relationship between public debt and economic growth.Alagba Ochuko S. Eferakeya Idowu(2018) studied The Effect of public debt oneconomic growth in Nigeria.Secondary data were used in this study. The data where drawn mainly from Central Bank ofNigeria Statistical bulletin, 2017, volume 28 and the Debt Management Office. The data wereconsidered adequate and appropriate for the study because the Central Bank of Nigeria (CBN)which collated the data is the apex banking institution with regulatory and supervisory powers inNigeria. The study investigated the effect of public debts on economic growth of Nigeria for the period ofthirty-eight (38) years, 1981 to 2018. Relevant secondary data were sourced from Central Bankof Nigeria Statistical bulletin and Debt Management Office. Among the objectives of the study isto analyze the effect of domestic debts on the economic growth of Nigeria and evaluate the effectof foreign debts on the economic growth of Nigeria. The findings showed that domestic debts of
the Federal government of Nigeria is positive and statistically significant to economic growth ofNigeria while foreign debts contribute less to the economic growth of the country. Cost of debtsservicing is significant and has a negative effect on economic growth.Isibor Areghan Akhanolu, A.A. Babajide, Akinjare Victoria, Oladeji Tolulope andOsuma Godswill (2018) studied The Effect of Public Debt on Economic Growth inNigeria.This study thus, focuses on the Nigerian government's debt and its bots intemal ad etemal debt adthait Taes ere peprested deait op, the repl shored that ortemal negatively impacts the economywhile internal debt positively does the same. For the second equation, GDP, total savingsdeposits in the Nigerian deposit money banks and capital expenditure were regressed againstinternal debt, the result showed that all the variables have significant relationship with internaldebt. The study thus, recommended that first; Corruption of borrowed funds should be tackled atall cost and also, government should minimize external borrowing, since, it impacts the economynegatively.Fasoranti Modupe Mary1, Koledoye Emmanuel Sunday(2019) studied The OptimalGovernment Debt and Economic Performance in Nigeria.This study examined the optimal point beyond which government debt impairs economicperformance in Nigeria. Data from the Central Bank of Nigeria (CBN) Statistical Bulletin from1986 to 2019 were employed for the study. Dynamic Ordinary Least Square (DOLS) was used toestimate the magnitude of the coefficients. The estimation showed a significant relationshipbetween government debt and Nigeria’s economic performance. Government debt is growth-enhancing at low levels but growth-retarding at a high level with the optimal government debtestimated as 9.98% of the gross domestic product (GDP). This implies that borrowing beyondsuch a limit becomes growth-retarding in the economy. The study concluded that an increase ingovernment debt elevates Nigeria’s economic performance. However, it becomes detrimental tothe economy when surpasses the threshold level estimated in this study. Therefore, the studyrecommends that the government should focus on other sources of revenue to fund its budgetdeficits to decrease the debt burden. Also, the debt management office (DMO) of the federal
government should introduce debt forgiveness measures that may encourage lending nations orentities to relax debt conditions, thereby reducing the debt profile of the country.Paul Ndubuisi (2019) studied External Debt and Economic Growth in Nigeria: LongRun Analysis.This study investigates the dynamic relationship between external debt and economic growth ofNigeria for period of 1985 to 2017 using Johansen approach to cointegration, vector errorcorrection model (VECM) and granger causality test. Data for the study was collected from theCBN statistical bulletin. The findings revealed that debt service payment has negative andinsignificant impact on Nigeria’s economic growth while external debt stock has negative andsignificant effect on economic growth. From the findings, the study recommends that policy-makers should reformulate the external debt management strategy to minimize sovereign riskthrough diversification of the external borrowing. This could potentially be achieved by reducingthe dependency on one specific debt instrument or currency. Hence, the strategy will be effectiveif it is carried out in parallel with a comprehensive surveillance and debt-monitoring system.EKPE, JOHN POLYCARP (2020) studied THE IMPACT OF EXTERNAL DEBTON ECONOMIC GROWTH IN NIGERIA.The study investigated the impact of external debt on economic growth in Nigeria.The study employed the Auto regressive distributed lag method, Bounds test and the Grangercausality test as analytical technique. The study found that external debt assumes a positive andinsignificant relationship with gross domestic product. Also, the ratio of external debt to exportindicates a negative and statistically significantThe study also discovered that there exists a longrun relationship between external debt and economic growth in Nigeria and the error correctiontest result revealed that 67% of the displacement of economic growth from its equilibrium valueas a result of the variations in external debt and other independent variables is correctedannually.The study recommends that government should diversify the nation's export base so as toincrease export earnings and promote industrialization in order to reduce import dependency as a
high exchange rate will make our goods more attractive in the foreign market and will increaseforeign exchange earnings.Roseline Oluwatoyin Oluitn (2020) studied The Effect of Public Debt on EconomicGrowth in Nigeria.The scarcity of resources has often made governments to search for sources to augment theavailable funds for developmental purposes. This study evaluates the impact of such borrowingsby government and allied institutions on the economic development of Nigeria over 56 years(1960 – 2015). The study employs an error correction model (ECM) to estimate the relationship.It observes that there is a positive correlation between the proxy for domestic debt and economicdevelopment while the proxy for domestic debt service payment is negative and significant. Thissuggests that domestic debt is contributing to the advancement of the economy while therepayment has inverse relationship with economic growth. The proxy for external debt andexternal debt service payment were negative though insignificant. The result calls for asignificant change in the source of public debt from external sources to domestic sources.Government should look inwards to fund budget deficit while serious efforts should be put inplace to reduce the external debt burden.AJAYI, Ibidolapo Ezekiel, EDEWUSI, Damilola Gabriel(2020) studied EFFECTOF PUBLIC DEBT ON ECONOMIC GROWTH OF NIGERIA: AN EMPIRICALINVESTIGATIONThis study examined the effect of public debt on economic growth of Nigeria.Secondary time series data spanning thirty-seven years (1982-2018) was gathered in the study.Data gathered in the study was estimated using descriptive statistics, unit root test, Johansen co-integration test and vector error correction model. Discoveries from the study suggests thatexternal debt exerts a negative long run and short run effect on economic growth of Nigeria anddomestic debt was ascertained to exert positive long run and short run effect on economic growthof Nigeria. Based on these findings, the study suggested that policy makers should integrateappropriate measures towards ensuring suitable management of domestic debts; governmentshould ensure that contracted national debts are directed towards encouraging investment in thecountry and government through necessary monitoring committees should ensure that national
debts are directed toward the provision of basic amenities and services required for thedevelopment of communities and societies of the nation.Abdulkarim Yusuf & Saidatulakmal Mohd (2021) studied The impact ofgovernment debt on economic growth in Nigeria.This study investigated the effect of government debt on Nigeria’s economic growth usingannual data from 1980 to 2018 and the Autoregressive Distributed Lag technique. The findingssuggested that the government should direct the borrowed funds to the diversification of theproductive base of the economy. This will improve long-term economic growth, expand therevenue base and strengthen the capacity to repay outstanding debts when due. Fiscalimprovements that encourage domestic resource mobilization, efficient debt managementstrategies and reliance on domestic debt rather than external debt for increased deficit financingto engender greater growth are the main contribution of the study.Mukhtar Shuaibu, Husayn Mahmud Muhammad(2021) studied The Impact ofPublic Debt on Inflation and Unemployment in Nigeria.This paper measures the impact of public debt on inflation and unemployment in Nigeria duringthe period 1985 to 2020. It uses annual data of 36 years range to conduct various types ofeconometric tests. It uses Autoregressive Distributive Lag model (ARDL) Error CorrectionModel (ECM) for the analysis of the data. Unit root tests and Granger causality tests were alsoconducted to test the efficacy and predictive capability of the model.The findings of the study show that long run relationship exists between public debt andunemployment in Nigeria. Itshows that increase in public debt causes more unemployment, butthat external debt causes more unemployment than domestic debt. But the results ofcointegration analysis show absence of relationship between public debt and inflation. The paperrecommends reduction in public debt and if at all government must borrow, then it shall givepriority to domestic debt over foreign debt.
Ekpete, Marshall S. Kenn-Ndubuisi, Juliet Ifechi (2021) studied TheMacroeconomic Effects on Stock Market Returns in Nigeria. The purpose of this study is to investigate the relationship between macroeconomic effects onstock market returns in Nigeria employing the CBN annual time series data spanning from 1985-2019. The study applied unit root test, auto-regressive distributed Lag and granger causality teststo investigate the relationship between all share index and interest rate, inflation rate, exchangerate. The unit root tests results for stationarity revealed that the entire variables are reliable foreconomic decisions. The findings of the study revealed that interest rate was negative and notsignificantly related with the all share index; also inflation rate was negative and not significantlyrelated with the all share index while exchange rate was positive and significantly related withthe all share index. The granger causality result revealed Uni-directional causality which impliesno causality. This study recommends that macroeconomic factors should be adequately managedby the Central Bank of Nigeria with the view to promoting investors‟ confidence in the stockmarket.Keghter Kelvin (2021) studied Public debt and economic growth: What we knowtoday about the Nigerian economy tomorrow.This paper investigated public debt and its potential consequence on economic growth throughits impact on investment. The study cut across 1981 to 2019 with data from World BankDevelopment Indicators (WDI) and Central Bank of Nigeria Statistical Bulletin. The Phillips-Perron unit root tested for stationarity, while the study estimated the model by adopting theAutoregressive distributed lag (ARDL) model. The long-run estimated results report that externaldebt and investment have a strong positive link with economic growth, while domestic debt andexternal debt service are inversely related to growth. In ascertaining the threshold level ofinvestment, the estimated result suggests that investment of domestic debt should not fall below25.41% to avoid an economic downturn. However, investing more than 24.55% of external debtwill leave the economy in shambles. Further findings suggest that increased investment ofdomestic debt and external loans in Nigeria is a blessing and curse, respectively. Therefore, it isrecommended that external debt investment be closely monitored to ensure optimal use so thatsuch debts would not be diverted to personal gain.
OSHODI, Raufu Olumide, ONYENEBO, Innocent Ndubisi(2021) all studied TheEffect of Public Debt on Economic Growth of Nigeria.This paper investigates the effects of public debt on economic growth of Nigeria between 1981 –2019 using annual time series sourced from various issues of statistical bulletin of the CentralBank of Nigeria, Debt Management Office and data from World Development Indicator (WDI).These data were analysed using inferential statistics and econometric model of Ordinary LeastSquare. The test mechanism adopted were the unit root test, causality test, bond test for co-integration and Autoregressive Distribution Lag (ARDL). Result shows that external debt andtotal debt servicing as a percentage of gross national income is inversely related to economicgrowth both in the short run and long run. External debt outstanding, external debt servicing,domestic debt outstanding, total reserve, total debt servicing as a percentage of growth rate andtotal reserve as a percentage of total external debt are positively related to economic growth bothin the short run and long run. This paper therefore recommend that government should notconsider further borrowing as an option to bridge the gap between revenue and expenditure sincethere is no evidence that the debt incurred in the past were judiciously used rather they shouldlook for alternative sources of fund by exploring the untapped natural resources of the country,encourage exportation of locally manufactured product to earn foreign exchange, adopt a robustmacroeconomic policy, enhance a conducive environment for business to thrive and growing theagricultural base of the country, this will ease financial need of the government and the economywill grow.Abdulkarim Yusuf1 and Saidatulakmal Mohd2 (2021) studied The impact ofgovernment debt on economic growth in Nigeria.This study investigated the effect of government debt on Nigeria’s economic growth usingannual data from 1980 to 2018 and the Autoregressive Distributed Lag technique. The empiricalresults showed that external debt constituted an impediment to long-term growth while its short-term effect was growth enhancing. Domestic debt had a significant positive impact on long-termgrowth while its short-term effect was negative. In the long term and short term, debt servicepayments led to growth retardation confirming debt overhang effect. The findings suggested thatthe government should direct the borrowed funds to the diversification of the productive base ofthe economy. This will improve long-term economic growth, expand the revenue base and
strengthen the capacity to repay outstanding debts when due. Fiscal improvements thatencourage domestic resource mobilization, efficient debt management strategies and reliance ondomestic debt rather than external debt for increased deficit financing to engender greater growthare the main contribution of the study. Olaolu, E. O. & Ibrahim, I. M.(2021) studied Impact of Domestic Debt on PrivateSector Investment and Economic Growth in Nigeria (2000-2020).This study examined the impact of domestic debt on private sector Investment and economicgrowth in Nigeria, covering the period 2000- 2019. The causal research design was employed.Unit root and cointegrated tests were carried out and the unit root test results showed that thevariables were non-stationary at level but became stationary after first differencing.Cointegration test results revealed that the variables are cointegrated meaning that they havelong-run equilibrium relationship. Using the ordinary least squares (OLS) method to estimate thespecified multiple regression models, findings showed that domestic debt and interest ondomestic debt negatively and significantly impacted on private sector investment and economicgrowth in Nigeria during the period under consideration. The negative impact of domestic debton private sector investment indicates that government domestic borrowing crowd-out privatesector investment. In lieu of the fact that government borrowing (especially domestic borrowing)stifles (crowd-out) private sector investment and retards economic growth in Nigeria, it isrecommended that since government borrowing especially through the money market is exertingadverse effects on private sector investment and economic growth, government should endeavorto borrow domestically through the capital market by further developing the Nigerian equity andbond markets in order to enable these markets have the capacity to provide the needed funds.Ahmed Oluwatobi Adekunle (2022) studied The Debt-Growth Nexus in Nigeria: AnEmpirical Evidence.This study examines debt-growth nexus in developing countries, Nigeria, using annual data from1986 to 2020. The data were sourced from CBN Statistical bulletin and WDI, ARDL techniqueswere employed to analyse the data. The findings of the study showed that domestic debtoutstanding is negative related to growth in the long run though it is growth enhancing in short-run. External debt is negative related to advancement in long run while in short run is positive
related. In the long run education is positive connected to growth but negative related to growthin the short run. The findings suggested that the national authority should channel both externaland domestic debt to the education and infrastructural expansion which can lunch the economyto be more productive and diversified.Betty O. Alli-Momoh1, Fatima (2022) studied An Assessment of the Impact ofPublic Debts on Development in Nigeria.This study assessed the impact of public debt on development of Nigeria. It specificallyinvestigated the relationship between human development index, per capital income, growth rateand public debt in Nigeria from 2003 to 2020. This study adopted quantitative research design.Relevant data regarding the variable’s under-study were extracted from the Debt ManagementOffice (DMO-2020) and UNESCO Institute of Statistics (2020) while regression model was usedto analyze the data. The study revealed among other things that; there is presence of co-integration (long-run relationship) among the variables in the model. The t-statistics of -2.297997with 0.0388 p-value implies negative and significant relationship exists between foreign debt andhuman development index, t-statistics of 2.557340 with 0.0239 p-values implies positive andsignificant relationship exists between foreign debt and per capital income and also t-statistics of-0.658730 with p-value of 0.5216 implies negative and insignificant relationship existencebetween foreign debt and growth rate. The overall result of the f-statistics of 4.109504 with Prob.(F-statistic) of0.029617 shows that all the explanatory variables jointly have significant impacton foreign debt both in the short and long run. The study concluded that there is significantrelationship between public debt and development in Nigeria, depending on the variable ofinterest. Likewise, the study recommended among other things that government should ensureefficiency and effectiveness in the public debt management due to the negative and significantinfluence.Abdulkarim Yusuf1, Saidatulakmal Mohd2 (2022) studied Nonlinear effects ofpublic debt on economic growth in Nigeria.This study’s main objective is to examine the asymmetric impact of public debt on economicgrowth in Nigeria from 1980 to 2020 using the Nonlinear Autoregressive Distributed Lagmethod. Empirical evidence indicated that external debt have a significant positive and sym-
metric impact on economic growth in the long and short run, while debt service paymentsupporting the debt overhang hypothesis activated a symmetric effect that stifle growth.Domestic debt retarded growth asymmetrically in the short term and linearly over the long term.Foreign reserve holding, on the other hand, had an asymmetric long-run influence and asymmetric short-run impact on growth motivation. To mitigate the negative effects ofunsustainable public debt, the study advocated for fiscal reforms that effectively reduce deficitfinancing to keep the level of government debt low and be able to respond robustly to aneconomic shock, improve domestic revenue generation and infrastructure spending, andstrengthen governance practices and institutions.Ahmed Tukur Umar Ph.D (2023) studied Estimation Of Public Debt Effect OnUnemployment And Inflation in Nigeria.This study estimated the effects of public debt on unemployment and inflation in Nigeria. A 40years’ time-series annual data on external debt, domestic debt, unemployment and inflation,spanning from 1980 to 2020 was used. Relevant diagnostic tests using E-views were conductedto test for unit root and granger causality. Autoregressive Distributive Lag Model (ARDL) ErrorCorrection Model were employed to analyze the data. The findings revealed that public debt andunemployment have a log run relationship. When borrowing increase in Nigeria, unemploymentincreases the more. Further findings indicated that domestic debt causes less unemployment thanexternal debt. However, cointegration analysis pointed no long-run relationship existing betweenpublic debt and inflation. The study urges the government to consider other important sources ofrevenue generation than borrowing. When borrowing becomes necessary then priority on internaldebt is highly recommended.IBUKUNOLUWA ADEBIYI1 and TOHEEB AKANBI MUSLIUDEEN (2023)studied The Impact of Government Debt on Nigeria's Economy Growth.The study reveals that the impact of government debt on economic growth over the period underreview is significant- with external debt, which has been enormous over the years, contributingminimally to real gross domestic product. The study makes use of a multiple regression model tocheck the relationship that exists between government debt and Nigeria's economy growth. Thefindings of the study reveal that if the cause of consistent borrowing is not curbed, the economy
will slump further, resorting to surplus budgeting and igniting increases in unemployment,decreases in total investment, falling reserves, increased exchange rate high inflation andconsequently increased poverty. Borrowing is thus recommended as a last resort by thegovernment to revitalize the economy, and if necessary, the loans should be sourced within theeconomy so that when the principal and interest on the loans are paid back, it will serve as acrowd-in-effect, which in turn accelerates economic activities in the country. Also, otheralternative sources of government revenue, especially taxation hitherto neglected, should beexplored to minimize dependence on borrowed funds to revamp the economy. Finally, powershould be made steady so that the costs of sectors that rely on alternative energy sources to thrivecan be decreased; thus, such monies can be utilized for remunerative alternative employment.