Nigeria’s Debt Burden and Development Tangle: The Socio-Economic and Political Implications

Abstract

The main purpose of this research is to empirically ascertain the nexus of Nigeria’s debt burden and development tangle. In order to embark on this exercise, relevant data were sourced from Central Bank of Nigeria statistical bulletin and National Bureau of Statistics fact book spanning the years (1980-2014). The Johansen test for the co-integrating association corroborates that a long run dynamic equilibrium link exists between economic development and debt stocks, and the Granger Causality result shows that the various debt stocks granger caused the performance of the  Nigeria’s economy. On the basis of our findings and conclusion thereof, and in the light of the need to encourage and promote economic development, a strategy that exercises tense embargo on fresh loans and advances should be put in place and the government should try by all means to reduce the quantum of public debt as well as its total eradication via debt buy back, total cancelling of the debt or complete repudiating of the debt stock. Policies that will promote increase in the volume of commodities export should be put in place by the government, which will boast earnings from foreign exchange and hence help to eliminate the huge deficit in the revenue account of the federation. The authorities saddled with the responsibilities of managing public debt should be steadfast in their drive for a sustainable debt management strategy than the SAP-induced strategies which delved on only differing the payment days but continued to perpetrate absolute poverty and inequality in third world nations. The moral tenet of fiscal produce in managing public debt should be enshrined. The country need to consolidate on the gains of the recent debt relief granted her and the diminution in total outstanding debt profile. The major ways to do this should be consistency in the application of prudent debt management framework, prudent borrowing for self-liquidating projects, and regular debt servicing commitment as well as outright liquidation of all outstanding debt liabilities.

Keywords: Debt exposure, debt burden, development tangle, Error Correction Model, Nigeria.