Title:
Public Debt and Private Domestic Investment in Nigeria: An Empirical Investigation

Authors:
M.S. Akpan, A. Awujola, D.A. Impalure, Nigeria

Abstract:

The Nigerian government has been borrowing hugely over the years to finance her budget. However, the patterns of spending have shown to be more on recurrent expenditure and servicing of debt. Such spending pattern tends to caused domestic investment to decline and sometimes unstable. The continuous increase in Nigeria’s public debts, it’s associated rising debt service and declining/unstable domestic investment, motivated this study. Consequently, the aim of the paper is to investigate how Nigeria’s public debts have impacted on the country’s private domestic investment using time series data from 1981 to 2021. The data were estimated using the Auto-distributed Lag Model (ARDL) and Error Correction Model (ECM) techniques of analysis. Cointegration test showed that long-run (or equilibrium) relationship exists between public debt and private domestic investment in Nigeria. Findings from the study revealed that public external debt and pubic domestic debt have negative relationship with private domestic investment, while public debt service has positive relationship with private domestic investment. The study concluded that public debt have significant impact on private domestic investment due to the joint result of the Wald test. The paper recommended that the Debt Management Office (DMO) of Nigeria who is vested with the management of the country’s debt should advice the federal government to minimize or discourage the collection of debts to fund her budget. Also, the funds borrowed should be channeled into investment on projects that will improve private domestic investment.

DOI: https://doi.org/10.51505/IJEBMR.2023.7312