The Nigeria’s Debt- Growth Nexus: A Blessing or Burden?

Abstract

The option of leveraging on recommendable borrowings does not only stimulate favourable economic growth but also offers meaningful upsurge in the financial position of parties involved. It is on this premise that prompted the essence to examine the Nigeria’s debtgrowth nexus: whether a blessing or burden, for the period 1981 to 2019. Secondary data from CBN statistical Bulletin were employed in the study. Using the Error Correction Model, the results reveal that, although debt servicing exerts negative relationship with economic growth, it is obvious that debt financing in Nigeria is a blessing as external and domestic debt stocks all exert positive influence on economic growth. However, only domestic debt stock is efficient enough to spur economic activities, which suggests that prudent employment of domestic debt which is not affected by exchange rate is a strong catalyst for rapid increase in economic activities in Nigeria. Therefore, having identified domestic debt as the linchpin of economic growth in Nigeria, the study recommends the choice for internally borrowed fund as the best benign financing option as well as its optimal utilization for meaningful commensurate economic activities. Also, recommendable threshold point of borrowing should strictly be adhere to, in order to avoid landing the economy into a state of onerous experience.