An Empirical Analysis of Public Borrowing and Economic Growth in Nigeria
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Date
2020
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Publisher
Academic Research Publishing Group
Abstract
This study seeks to evaluate the impact of public borrowing on economic growth in Nigeria using time series data from
1980 to 2018. Specifically, the study seeks to analyze the effect of domestic debt (proxy by Federal Government Bonds FGB) and external debt (proxy by International Monetary Fund Loan-IMFL) on Nigerian’s Gross Domestic Product
(GDP). To achieve this objective, secondary data was collected from the Central Bank of Nigeria Statistical bulleting and
the Debt Management Office of Nigeria. A multiple regression model involving the dependent variable (GDP) and the
independent variables (FGB and IMFL) was formulated and subjected to econometric analysis. These variables were
adjusted with the Jarque-bera test of normality while the correlation result was used to check the possibility of multi collinearity among the variables. The t-test was used to answer the research questions and test the formulated hypotheses
at the 5percent statistical level. Results from the analysis show that a positive relationship exists between IMF Loan and
Nigeria’s gross domestic product, while a negative relationship exists between FG Bonds and Nigeria’s gross domestic
product, which violates the Keynesian theory of public debt. The study concludes that both domestic and external debt
significantly affect economic growth in Nigeria. Therefore, it was recommended that public borrowing should be
efficiently used and contracted solely for economic reasons and not for social or political reasons as this will help to
avoid accumulation of debt stock overtime.