JEFMS Journal

ABSTRACT:

This study xrayed the impact of total debt on economic growth of Nigeria using data from the Central Bank of Nigeria’s statistical bulletin from 1981 to 2019 period. The analytical tool used was the E-view version 13 where the multicollinearity test showed that domestic debt and external debt move predominantly in the same direction with gross domestic product. The result of the Error Correction Model shows that it was appropriately signed at 13.9% meaning that the previous period’s disequilibrium in economic growth (proxied by GDP) value is corrected every year by external and domestic debts. Following the result, it is evident that external debts incurred in Nigeria over time are good debt, as this has over time exerted no critically negative impact on the growth level of the nation. Similarly, the result shows that domestic debt exerts a positive long run and short run impact on economic growth of Nigeria. Using the Granger Causality test it was observed that External and Domestic Debt granger causes GDP, the implication of this is that total debt of Nigeria if properly utilized, stimulates economic growth as seen in the granger causality test. The researcher amongst other recommendations suggest that Policy makers should integrate appropriate measures towards ensuring suitable management of domestic debts so as to enhance the productivity level of the country.

Keywords:

GDP, External Debt, Domestic Debt, Total Debt, ECM

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