Domestic Debt Structure and Economic Growth in Nigeria, 1980 -2018

International Journal of Research and Innovation in Social Science (IJRISS) | Volume IV, Issue I, January 2020 | ISSN 2454–6186

Domestic Debt Structure and Economic Growth in Nigeria, 1980 -2018

Okorie, Stanley¹, Cookey, Boma Clement^2
 1,2Department of Economics, Faculty of Social Sciences, University of Port Harcourt, Nigeria

Abstract:-The main objective of the study is to examine the impact of public debt structure on Nigeria’s economic growth in from 1980 to 2018. Conceptual framework of the study was based on the Keynesian theory of public debt which opined that changes public debt structure has effect on aggregate demand and economic growth. The study used secondary data collected from the Central Bank of Nigeria statistical Bulletin and the World Bank Economic Development Index (WDI). The model specification adopted for the study was a modified version of Okon (2013) to accommodate development stock. The study applied the Engle-Granger (1979) Error Correction Model estimation techniques. The unit rot test result revealed that all the variables were not stationary at level, but became stationary after 1st differencing. The co-integration results showed that there is long run relationship among the variable. The estimation of the error correction model (ECM) revealed that development stock had negative, but significant relationship with economic growth. Treasury bond impact on the economic growth was found positive but insignificant. The impact of Treasury bill was found negative, but also insignificant. It was also observed that variations in public debt structure accounted for about 67% variation in economic growth during the period under review. It was therefore recommended that government should diversify the economy to reduce debt Borden on economic growth.

Keywords: Domestic debt, Debt Overhang. Economic growth, Treasury bill, Treasury bond

I. INTRODUCTION

Domestic debt is mainly debt owed to holders of government securities such as Treasury Bills (TBs), Development stock (DS) and Treasury Bond (TB). The government usually borrow by issuing securities which are (IOUs) to the lenders. According to Musgrave and Musgrave (2010) government usually borrow or incur debt for two reasons. The first is when government revenue falls short of expenditure. The second is for the reason of paying off maturing loan. Government could borrow from the domestic sources, especially, if domestic financial market is developed or overseas if where the domestic market is underveloped. Thus, government borrowing or public debt can be classified into domestic debt and external debt.

Read More