Year: 2022
Type: conference-paper
Abstract: This study examines the effect of debt sustainability on Nigeria’s economic growth. In contrast to previous studies, this study takes a holistic approach that considers both domestic and external debt, as well as debt service payments. The study used yearly data that covered a period of forty years (1981 - 2020). Consequently, the non-linear autoregressive distributed lag (NARDL) econometric technique was used to decompose the effects of the debt variables into their positive and negative effects to ascertain if the inconsistent results documented by previous studies could be attributed to undetected asymmetries. The study established that Nigeria’s total debt stock and debt service payments had a considerable short-run effect on the economic growth of the country, but that only a reduction in total debt stock is important for long-run economic growth in the country. It was discovered that an increase in total debt stock initially has a terrible impact on economic growth, but that it has a positive impact after one year. On the other hand, the short-run effect of a total debt stock decrease is found to be consistently positive for all lags. Concerning debt service payment, the short-run effect showed that economic growth decreases when debt service payment increases and economic growth increases when debt service payment decreases. In the long-run, only a decrease in the total debt stock decreases economic growth significantly. From Recommendations from this study state that debt accumulation should be used to increase the country’s production capacity by increasing investments in infrastructure (e.g., power and better transportation networks) and to improve human capital development as these would help maximize the social gains from debt.
Authors: A. O. Matthew, A. O. Adetayo
Institution: Covenant University
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W4296700660