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| Assessment of the Relationship between Debt and Economic Growth in Nigeria |
Hassan, Ajoke Esther, Adegbola, Muritala Makinde, Adebisi, Rufus Olakunle, Odetoyinbo, Yewande Odunayo, Adeyemi, Akeem Ademola,
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Abstract:
This study examine the relationship between internal and external debt on economic growth and development in Nigeria over the period 1989 to 2019 .It adopted regression analysis of OLS on secondary data sourced from CBN, Economical and Financial review, Business times, Financial Standard and relevant publication from Nigeria on variable like National Income, Debt Service Payment, External Reserves, Interest rate among others. The study employed the Johansen co-integration test and Error Correction Method. The co-integration test shows the existence of long run equilibrium relationship among the variables. The error correction method reveals that the lagged error. The results of this study have shown clearly that causation between debt and economic growth is weak in the Nigerian situation and debt could therefore not be used to forecast improvement or slowdown in economic growth in Nigeria. Hence, changes in GDP cannot be predicted with changes in debt. As causality could not be perfectly established, causation between debt and growth in Nigeria is empirically weak and insignificant, and as such, changes in GDP cannot be predicted with changes in Nigeria debt. Based on the finding the study suggest that for debt to promote growth in Nigeria, fiscal discipline and high level of responsibility in managing public funds should be the paramount concern of the government. External debt which take the larger percentage of Nigeria debt should be spend judiciously on capital and human infrastructure in order to make growth robust, sustainable and inclusive. Government should also ensure that debt accumulation beyond debt threshold level in Nigeria should be blatantly discouraged.
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