Empirical Evaluation of the Public Debt Structure–GDP Growth Nexus in Nigeria

Abstract

This study examined the effect of public debt structure on economic growth in Nigeria over the period 1990–2024. Specifically, it assessed the effects of domestic debt stock, external debt stock, total public debt-to-GDP ratio, and debt service payments on gross domestic product growth rate. The study adopted an ex-post facto research design and used annual secondary data obtained from relevant publications of the Central Bank of Nigeria, the Debt Management Office, and the World Development Indicators. The data were analysed using the Autoregressive Distributed Lag (ARDL) technique. The unit root results revealed a mixture of I(0) and I(1) variables, supporting the suitability of the ARDL approach. The bounds test confirmed the existence of a long-run relationship between public debt structure and economic growth. The results showed that domestic debt stock and debt service payments had significant negative effects on economic growth in the long run, while external debt stock had a significant positive effect. The total public debt-to-GDP ratio had a significant negative short-run effect but not statistically significant long-run effect. The error-correction term was negative and statistically significant, indicating adjustment towards long-run equilibrium. The study concludes that the effect of public debt on economic growth depends on its composition and management. It recommends prudent domestic borrowing, improved debt servicing capacity, productive utilisation of external loans, and stronger public debt management to promote economic growth in Nigeria