Effect of Government Public Debt on Economic Development in Nigeria
Keywords:Error Correction Mechanism, domestic debt, human development index, CBN statistical bulletin
This study examined the resultant effect of government borrowings on economic development in Nigeria. This study span from the period of 1990 to 2020 and annual data was sourced secondarily from the World Development Indicators database (2020) and CBN statistical bulletin which were analyzed using multiple regression model with Augmented Dickey-Fuller (ADF) unit root test, Johansen co-integration, and Error Correction Mechanism (ECM). The study employed external debt (EXD), domestic debt (DOD), interest rate (INTR), and inflation (INF) as independent variables whilst the human development index (HDI) was used as the dependent variable and was a proxy for development. The result revealed a positive statistically significant relationship between external debt and economic development the same as domestic debt and economic development in Nigeria, while interest rates have a negative statistically significant relationship with economic development in Nigeria. However, inflation was found to be negatively statically insignificant to economic development in Nigeria. Based on the findings, this study recommended that the government should direct borrowed monies to sectors/areas of the economy that will spur growth, such as education, health, industry, and transportation. The education and health sectors can be enhanced with enough funding and equipment; skill learning should be made mandatory beginning in secondary school.