Does Government Debt Affect Economic Growth in Nigeria? A Short and Long Run Assessment
Keywords:
economic growth, debt, treasury bill, treasury bonds
Abstract
This study employed secondary data from the Central Bank of Nigeria and Nigeria’s statistical bulletin to investigate the impact of domestic debt on the economic growth of Nigeria for the period 20 years (2003-2022). The study uses Gross Domestic Product (GDP) as the dependent variable to measure the Nigerian economic growth; whereas, the domestic debt data include debts through Treasury bills, Treasury bonds and FGN bonds as the independent variables. Three hypotheses were tested using Johansen cointegration test and Error Correction model. The study reveals that total domestic debt has consistently increased over the years. The result of the cointegration test reveals that there is a long-run equilibrium relationship between domestic debts and GDP. The ECM result reveals that all the independent variables- Treasury bills, Treasury bond and FGN Bond have an insignificant but positive impact with the growth of Nigerian economy in the short run. The study concluded that the relationship between economic growth and the domestic debt is positive. Based on the outcome of the findings, the study recommended that the government should encourage policies to improve the public participation in the subscription of domestic debt instruments to ensure these variables continue to impact economic growth positively. Also, the positive impact of domestic debt on economic growth, government should channel their effort towards avenues that will boost internally generated funds and lessen the continuous borrowing as it could have a detrimental effect on macroeconomic growth in the long run.
References
Abbas, S. M. & Christensen, J. (2007). The role of domestic debt markets in economic growth: An empirical investigation for Low-Income Countries and Emerging Markets. IMF Working Papers, 07(127).
Asogwa, R.C., (2005). Domestic government debt structure, risk characteristics and monetary policy conduct, evidence from Nigeria. http://www.imf.org/external/ np/res/seminars/2005/macro/pdf/asogwa.pdf.
Adofu, I., & Abula, M. (2009). Domestic Debt and the Nigerian Economy. Current Research Journal of Economic Theory, 2(1), 22–26
Albuquerque, B (2021). Corporate debt booms, financial constraints, and the investment nexus. Bank of England Working Papers 935.
Albuquerque, B & Krustev, G. (2018). Debt overhang and deleveraging in the US household sector: gauging the impact on consumption. Review of Income and Wealth 64(2), 459–481.
Alshammari, M.D., Karim, Z.A., Khalid, N. & Ahmed, R. (2020). Debt-Growth nexus in the MENA Region: Evidence from a panel threshold analysis. Economies, 2020, 8 (4), 1-12
Amassoma, D. (2011). External debt, internal debt, economic growth and investment in Nigeria using Causality Approach. Current Research Journal of Social Sciences, 3(4), 320–325
Anyanfo, A. (1993). Public Finance in a developing economy – the Nigerian Case, Enugu
Ajide, K. B. (2014). Determinants of economic growth in Nigeria. CBN Journal of Applied Statistics. 5(2), 5-16.
Ajayi, L. B. & Oke, M. O. (2012) Effect of External Debt on Economic Growth and Development of Nigeria. International Journal of Business and Social Science. 3(12), 2-12.
Ajayi, H., & Edewusi, C. A. (2020). Fiscal Sustainability: The Unpleasant European Case. Public Finance Analysis, 61(1), 19–44.
Asogwa, R. C & Ezema, C. C. (2005). Domestic government debt structure, risk characteristics and monetary policy conduct: Evidence from Nigeria. Final Research Report submitted for “International Research Project on macroeconomic policy challenges for low income countries.
Asolu, T.A., Akinadawo, I.S. & Oyedoku G.E. (2020). Domestic Debt Management and Governance Revenue in Nigeria.
Abbas, M., K. (2007). The impact of high and growing government debt on economic growth an empirical investigation for the euro area. Working Paper Series No. 123
Babu, J.O., Symon, K., Aquilars, M.K. & Mose, G. (2015). Effect of domestic debt on economic growth in the East African Community. American Journal of Research Communication, 3(9), 73-95
Bakare, I.O.A., Ogunlana, O.F., Adeleye, O. & Mudasiru, A. (2016). Empirical analysis of the effects of domestic debt on Nigerian economic growth. International Journal of Social Sciences and Humanities Reviews, 6(1), 40 – 50.
Boccia, R. (2013). How the United States’ high debt will weaken the economy and hurt Americans: Backgrounder. Working Paper No. 2768. The Heritage Foundation. Leadership
CBN (2019). Developing Government Bond Markets: A Handbook.
Christensen, J., (2004). Domestic Debt Markets in Sub-Saharan Africa. IMF Working, Goirle Municipality, Netherlands.
Cornelius, E., & Desmond, A., (2022). Domestic debt burden and its impact on the growth of Nigerian economy. Global Scientific Journal, 10(10), 1101-1112
Egbetunde, T. (2012). Public Debt and Economic Growth in Nigeria: Evidence from Granger Causality. American Journal of Economics, 2(6), 101–106
Ezirim, C.B. (2005). Finance Dynamics; Principles Techniques and Applications. Port Harcourt: Markowitz Centre for Research Develop
Felix, C.A. (2020). The relative potency and domestic debts on economic performance in Nigeria. European Journal of Humanities and Social Sciences, 27(1), 1414-1429
Giroud, X & Mueller, H, M. (2017). Firm leverage, consumer demand, and employment losses during the great recession. The Quarterly Journal of Economics 132(1): 271–316.
Garba, C. (1998). Debt profile and the economic growth: Evidence from the Nigerian Economy: A Research Journal of Finance and Accounting, 3(5) 2012. Central Bank of Nigeria statistical Bulletin 2015
Hassan, O.M., Sule, A. & Abu, J. (2015). Implications of external debt on the Nigerian economy: Analysis of the dual gap theory. Journal of Economics and Sustainable Development, 6 (13), 238-248.
Ibrahim, A. K. & Khan, S. M. (2019). Domestic debt and economic growth in Nigeria: An ARDL bounds test approach. Economics and Business, 33(1), 55-68
Idowu , A. E., Sanni, H.T., Akpan, D.B., Ekeocha, P.E., Ikenna-Ononugbo, A.A., Penzin, D.J., Musa, A.U., Golit, P.D., Ajala, K., Ibi, E.H. & Opiah, D.C. (2018). Government borrowing: Implications for macroeconomic stability and growth in Nigeria. Economic and Financial Review, 56(1), 55-94.
John, C. E. (2016). Domestic debt and Nigerian economy. Being a Project Submitted to the Department of Finance and Banking, Faculty of Management Sciences, University of Port Harcourt, in Partial Fulfillment of the Requirement for the Award of Bachelor of Science (B.Sc.) Degree in Finance.
Kalemli-Ozcan, S, L Laeven & D Moreno (2019). Debt overhang, rollover risk, and corporate investment: evidence from the European crisis”, Working Paper Series 2241, European Central Bank.
Kobayashi, K. (2015). Public debt overhang and economic growth. Public Policy Review, 11(2), 247-276.
Lotto, J., & Mmari, C. T. (2018). Domestic debt and economic growth in Tanzania. Journal of Economics and Management Sciences, 1(1), 207-219.
Muhammad, O. L., Lamidi, N.J.,Olaleye, E. O. & Adedayo, G. O. (2020). Effect
of external debt on economic growth: Evidence from Nigeria.
Maithreerathna R. D., Mummullage P. Chamika , & Gunasinghe, C. (2019). An empirical analysis of the impact of total debt on the economic growth of Sri Lanka. Discussion Paper in Economics. The Economics 201903
Mba, P. N., Yuni, D. N. & Chukwuedo., S.O. (2013). Analysis of domestic debt: implication for economic growth in Nigeria. Global Journal of Social Sciences. 12
Mbah. A., Godwin, U. & Agu, O. C. (2016). Impact of External Debt on Economic Growth in Nigeria: An ARDL Bound Testing Approach
Ngerebo-A, TA. (2014). Domestic Debt and Poverty in Nigeria: An Empirical Time Series Investigation. European Journal of Accounting Auditing and Finance Research, 2(5),
Nneka, M. N & Damabatta, S.A., (2021). A disaggregated analysis of the effect of domestic public debt on economic growth in Nigeria. Journal of Economics and Allied Research. 6(3), 15-29.
Nwani, V. (2019). Nigeria in 2019: Low growth versus rising risks advised against further borrowing. First City Monument Bank South-West region media parley in Ibadan, August 29, 2019.
Nwinee, B.F. & Torbira, L.L. (2012). Public Financial Management in Nigeria. Port Harcourt: University of Port Harcourt Press
Nzotta, (2004). Money, Banking and Finance. Owerri ; Hudson-Jude Nigeria Publishers
Ogunbiyi, S.S. & Okunlola, F.A. (2015): Domestic debt and real sector growth: A VAR Approach”. International Journal on Banking and Finance Research, 5,2015
Omotosho, B. S. Bawa, S. & Doguwa, S. I. (2016). Determining the optimal public debt threshold for Nigeria.CBN Journal of Applied Statistics. 7(2), 45-67.
Okunronmu, S. I., (2012). Domestic Debt and Economic Growth in Nigeria. Journal of Economics and Sustainable Development, 1(5), 45-60.
Okonjo-Iweala. (2011).Frets over rising domestic liabilities, The Nation News Paper of 25th August, 2011
Okwu, A. T., Obiwuru, T. C., Obiakor, R. T. & Oluwalaiye, O. B. (2019). Domestic debt and economic growth in Nigeria: Data-based evidence. Greener Journal of Economics and Accountancy 5(1), 001-012.
Oliinyk, V. & Kozmenko, S. (2019). Forecasting and management of gross domestic product. Journal of International Studies, 12(4).
Oshadarni, O.L. (2006). The Impact of domestic debt on Nigeria’s economic growth. BSC Project Page 20, Department of Economics, Kogi State University, Ayigha
Ozolina, C.E., Alfred, J.H., Aruna, & Kormay, A. (2017). Impact of domestic debt on economic growth in Sierra Leone: An empirical investigation West African Journal of Monetary and Economic Integration, 17(2), 2-22
Oji, U. G., & John, E. C., (2022). Domestic debt effect on Nigeria’s economic growth. International Journal of Business Management. 05(03), 01-15.
Oyedeji, T. M.O. (1985). Nigeria and the IMF. African Economic Research Consortium, Research Paper No.8. Initiative Publishers, Initiative Limited, Nairobi.
Onyeiwu, C. (2012). Domestic Debt and the Growth of Nigerian Economy. Research Journal of Finance and Accounting. 3(5), 56-70.
Uchenna, O. L., Modebe, N.J.,Adedayo, E. O. & Evbuomwan,G. O. (2017). Effect of External Debt on Economic Growth: Evidence from Nigeria. Sustainable Economic Growth, Education Excellence, and Innovation Management through Vision 2020
Sheikh, M. R., Faridi, M. Z., & Tariq, K. (2010). Domestic Debt and Economic Growth in Pakistan: An Empirical Analysis. Pakistan Journal of Social Sciences, 30(2), 373–387.
Solow, R., (1970). A Contribution to the theory of economic growth. Quarterly Journal of Economics, 70: 65-94.
Spilioti, S., & Vamvoukas, G. (2015). The impact of government debt on economic growth: An empirical investigation of the Greek market. The Journal of Economic Asymmetries, 12(1), 34-40.
Swean, B. & George T. (2022). What is a conceptual framework?/ Tips and examples. www.scribbr.com
Todaro, M. P., & Smith, S. C. (2015). Economic Development, (12th Ed.). New York, USA, Pearson
Thuan, V. D. (2018). Determinants of public debt in lower-middle income countries. VNU Journal of Science: Policy and Management Studies, 34(3).
Umaru, A., Hamidu, A., & Musa, S. (2013). External Debt and Domestic Debt Impact on the Growth of the Nigerian Economy. MPRA Paper No. 75122. Retrieved from https://mpra.ub.unimuenchen.de/75122/1/MPRA_paper_75122.pdf
Yusuf, A., & Mohd, S. (2021). The impact of government debt on economic growth in Nigeria. Cogent Economics & Finance, 9(1), 1946249.
Asogwa, R.C., (2005). Domestic government debt structure, risk characteristics and monetary policy conduct, evidence from Nigeria. http://www.imf.org/external/ np/res/seminars/2005/macro/pdf/asogwa.pdf.
Adofu, I., & Abula, M. (2009). Domestic Debt and the Nigerian Economy. Current Research Journal of Economic Theory, 2(1), 22–26
Albuquerque, B (2021). Corporate debt booms, financial constraints, and the investment nexus. Bank of England Working Papers 935.
Albuquerque, B & Krustev, G. (2018). Debt overhang and deleveraging in the US household sector: gauging the impact on consumption. Review of Income and Wealth 64(2), 459–481.
Alshammari, M.D., Karim, Z.A., Khalid, N. & Ahmed, R. (2020). Debt-Growth nexus in the MENA Region: Evidence from a panel threshold analysis. Economies, 2020, 8 (4), 1-12
Amassoma, D. (2011). External debt, internal debt, economic growth and investment in Nigeria using Causality Approach. Current Research Journal of Social Sciences, 3(4), 320–325
Anyanfo, A. (1993). Public Finance in a developing economy – the Nigerian Case, Enugu
Ajide, K. B. (2014). Determinants of economic growth in Nigeria. CBN Journal of Applied Statistics. 5(2), 5-16.
Ajayi, L. B. & Oke, M. O. (2012) Effect of External Debt on Economic Growth and Development of Nigeria. International Journal of Business and Social Science. 3(12), 2-12.
Ajayi, H., & Edewusi, C. A. (2020). Fiscal Sustainability: The Unpleasant European Case. Public Finance Analysis, 61(1), 19–44.
Asogwa, R. C & Ezema, C. C. (2005). Domestic government debt structure, risk characteristics and monetary policy conduct: Evidence from Nigeria. Final Research Report submitted for “International Research Project on macroeconomic policy challenges for low income countries.
Asolu, T.A., Akinadawo, I.S. & Oyedoku G.E. (2020). Domestic Debt Management and Governance Revenue in Nigeria.
Abbas, M., K. (2007). The impact of high and growing government debt on economic growth an empirical investigation for the euro area. Working Paper Series No. 123
Babu, J.O., Symon, K., Aquilars, M.K. & Mose, G. (2015). Effect of domestic debt on economic growth in the East African Community. American Journal of Research Communication, 3(9), 73-95
Bakare, I.O.A., Ogunlana, O.F., Adeleye, O. & Mudasiru, A. (2016). Empirical analysis of the effects of domestic debt on Nigerian economic growth. International Journal of Social Sciences and Humanities Reviews, 6(1), 40 – 50.
Boccia, R. (2013). How the United States’ high debt will weaken the economy and hurt Americans: Backgrounder. Working Paper No. 2768. The Heritage Foundation. Leadership
CBN (2019). Developing Government Bond Markets: A Handbook.
Christensen, J., (2004). Domestic Debt Markets in Sub-Saharan Africa. IMF Working, Goirle Municipality, Netherlands.
Cornelius, E., & Desmond, A., (2022). Domestic debt burden and its impact on the growth of Nigerian economy. Global Scientific Journal, 10(10), 1101-1112
Egbetunde, T. (2012). Public Debt and Economic Growth in Nigeria: Evidence from Granger Causality. American Journal of Economics, 2(6), 101–106
Ezirim, C.B. (2005). Finance Dynamics; Principles Techniques and Applications. Port Harcourt: Markowitz Centre for Research Develop
Felix, C.A. (2020). The relative potency and domestic debts on economic performance in Nigeria. European Journal of Humanities and Social Sciences, 27(1), 1414-1429
Giroud, X & Mueller, H, M. (2017). Firm leverage, consumer demand, and employment losses during the great recession. The Quarterly Journal of Economics 132(1): 271–316.
Garba, C. (1998). Debt profile and the economic growth: Evidence from the Nigerian Economy: A Research Journal of Finance and Accounting, 3(5) 2012. Central Bank of Nigeria statistical Bulletin 2015
Hassan, O.M., Sule, A. & Abu, J. (2015). Implications of external debt on the Nigerian economy: Analysis of the dual gap theory. Journal of Economics and Sustainable Development, 6 (13), 238-248.
Ibrahim, A. K. & Khan, S. M. (2019). Domestic debt and economic growth in Nigeria: An ARDL bounds test approach. Economics and Business, 33(1), 55-68
Idowu , A. E., Sanni, H.T., Akpan, D.B., Ekeocha, P.E., Ikenna-Ononugbo, A.A., Penzin, D.J., Musa, A.U., Golit, P.D., Ajala, K., Ibi, E.H. & Opiah, D.C. (2018). Government borrowing: Implications for macroeconomic stability and growth in Nigeria. Economic and Financial Review, 56(1), 55-94.
John, C. E. (2016). Domestic debt and Nigerian economy. Being a Project Submitted to the Department of Finance and Banking, Faculty of Management Sciences, University of Port Harcourt, in Partial Fulfillment of the Requirement for the Award of Bachelor of Science (B.Sc.) Degree in Finance.
Kalemli-Ozcan, S, L Laeven & D Moreno (2019). Debt overhang, rollover risk, and corporate investment: evidence from the European crisis”, Working Paper Series 2241, European Central Bank.
Kobayashi, K. (2015). Public debt overhang and economic growth. Public Policy Review, 11(2), 247-276.
Lotto, J., & Mmari, C. T. (2018). Domestic debt and economic growth in Tanzania. Journal of Economics and Management Sciences, 1(1), 207-219.
Muhammad, O. L., Lamidi, N.J.,Olaleye, E. O. & Adedayo, G. O. (2020). Effect
of external debt on economic growth: Evidence from Nigeria.
Maithreerathna R. D., Mummullage P. Chamika , & Gunasinghe, C. (2019). An empirical analysis of the impact of total debt on the economic growth of Sri Lanka. Discussion Paper in Economics. The Economics 201903
Mba, P. N., Yuni, D. N. & Chukwuedo., S.O. (2013). Analysis of domestic debt: implication for economic growth in Nigeria. Global Journal of Social Sciences. 12
Mbah. A., Godwin, U. & Agu, O. C. (2016). Impact of External Debt on Economic Growth in Nigeria: An ARDL Bound Testing Approach
Ngerebo-A, TA. (2014). Domestic Debt and Poverty in Nigeria: An Empirical Time Series Investigation. European Journal of Accounting Auditing and Finance Research, 2(5),
Nneka, M. N & Damabatta, S.A., (2021). A disaggregated analysis of the effect of domestic public debt on economic growth in Nigeria. Journal of Economics and Allied Research. 6(3), 15-29.
Nwani, V. (2019). Nigeria in 2019: Low growth versus rising risks advised against further borrowing. First City Monument Bank South-West region media parley in Ibadan, August 29, 2019.
Nwinee, B.F. & Torbira, L.L. (2012). Public Financial Management in Nigeria. Port Harcourt: University of Port Harcourt Press
Nzotta, (2004). Money, Banking and Finance. Owerri ; Hudson-Jude Nigeria Publishers
Ogunbiyi, S.S. & Okunlola, F.A. (2015): Domestic debt and real sector growth: A VAR Approach”. International Journal on Banking and Finance Research, 5,2015
Omotosho, B. S. Bawa, S. & Doguwa, S. I. (2016). Determining the optimal public debt threshold for Nigeria.CBN Journal of Applied Statistics. 7(2), 45-67.
Okunronmu, S. I., (2012). Domestic Debt and Economic Growth in Nigeria. Journal of Economics and Sustainable Development, 1(5), 45-60.
Okonjo-Iweala. (2011).Frets over rising domestic liabilities, The Nation News Paper of 25th August, 2011
Okwu, A. T., Obiwuru, T. C., Obiakor, R. T. & Oluwalaiye, O. B. (2019). Domestic debt and economic growth in Nigeria: Data-based evidence. Greener Journal of Economics and Accountancy 5(1), 001-012.
Oliinyk, V. & Kozmenko, S. (2019). Forecasting and management of gross domestic product. Journal of International Studies, 12(4).
Oshadarni, O.L. (2006). The Impact of domestic debt on Nigeria’s economic growth. BSC Project Page 20, Department of Economics, Kogi State University, Ayigha
Ozolina, C.E., Alfred, J.H., Aruna, & Kormay, A. (2017). Impact of domestic debt on economic growth in Sierra Leone: An empirical investigation West African Journal of Monetary and Economic Integration, 17(2), 2-22
Oji, U. G., & John, E. C., (2022). Domestic debt effect on Nigeria’s economic growth. International Journal of Business Management. 05(03), 01-15.
Oyedeji, T. M.O. (1985). Nigeria and the IMF. African Economic Research Consortium, Research Paper No.8. Initiative Publishers, Initiative Limited, Nairobi.
Onyeiwu, C. (2012). Domestic Debt and the Growth of Nigerian Economy. Research Journal of Finance and Accounting. 3(5), 56-70.
Uchenna, O. L., Modebe, N.J.,Adedayo, E. O. & Evbuomwan,G. O. (2017). Effect of External Debt on Economic Growth: Evidence from Nigeria. Sustainable Economic Growth, Education Excellence, and Innovation Management through Vision 2020
Sheikh, M. R., Faridi, M. Z., & Tariq, K. (2010). Domestic Debt and Economic Growth in Pakistan: An Empirical Analysis. Pakistan Journal of Social Sciences, 30(2), 373–387.
Solow, R., (1970). A Contribution to the theory of economic growth. Quarterly Journal of Economics, 70: 65-94.
Spilioti, S., & Vamvoukas, G. (2015). The impact of government debt on economic growth: An empirical investigation of the Greek market. The Journal of Economic Asymmetries, 12(1), 34-40.
Swean, B. & George T. (2022). What is a conceptual framework?/ Tips and examples. www.scribbr.com
Todaro, M. P., & Smith, S. C. (2015). Economic Development, (12th Ed.). New York, USA, Pearson
Thuan, V. D. (2018). Determinants of public debt in lower-middle income countries. VNU Journal of Science: Policy and Management Studies, 34(3).
Umaru, A., Hamidu, A., & Musa, S. (2013). External Debt and Domestic Debt Impact on the Growth of the Nigerian Economy. MPRA Paper No. 75122. Retrieved from https://mpra.ub.unimuenchen.de/75122/1/MPRA_paper_75122.pdf
Yusuf, A., & Mohd, S. (2021). The impact of government debt on economic growth in Nigeria. Cogent Economics & Finance, 9(1), 1946249.
Published
2025-07-17
How to Cite
Takon Samuel Manyo, & Ogar Anthony. (2025). Does Government Debt Affect Economic Growth in Nigeria? A Short and Long Run Assessment. International Journal of Economics, Business and Innovation Research, 4(04), 1411-1431. https://doi.org/10.63922/ijebir.v4i04.2091
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