Public Debt, Infrastructure and Economic Growth in Nigeria

Abstract

This study examines the effect of public debt and infrastructure on economic growth in Nigeria between 1981 to 2022. Secondary data were sourced from the Central Bank of Nigeria Statistical bulletin, Debt Management Office and the World Bank. The primary objective is to analyze the effects of public debt on Nigeria's real GDP growth rate and to evaluate the significance of infrastructure in driving economic growth. The unit root tests- the Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) tests were employed to assess the stationarity of the variables while the cointegration tests were conducted to explore long-term relationships among the variables. The findings reveal that external debt has a significant negative impact on Nigeria's economic growth, while internal debt shows no significant effect. Infrastructure demonstrates a significant positive impact on economic growth. The study concludes that prudent external debt management and strategic infrastructure are crucial for fostering sustainable economic growth in Nigeria. Based on these findings, several recommendations are proposed; Policymakers should prioritize borrowing from concessional sources to minimize the external debt burden, place embargo on new loans and implement stringent debt management policies. Developing a robust domestic debt market through regulatory enhancements and private sector incentives can provide a stable funding source for developmental projects. Additionally, strategic investments in critical infrastructure sectors, supported by public-private partnerships (PPPs), can address bottlenecks and encourage foreign direct investments.

Keywords: Public debt, Internal debt, External debt, Infrastructure, Economic growth, Debt management.

JEL Code: H63, H54, O40

DOI: 10.7176/JESD/16-1-07

Publication date: January 30th 2025