Debt Financing and Economic Growth: Evidence of Nigeria Economy

Akpovofene Erhinyodavwe J., Kpolode, Oghenevwo P.
Department of Accountancy, Niger Delta University, Amasoma, Bayelsa State, Nigeria
DOI: https://doi.org/10.51244/IJRSI.2023.10709
Received: 22 July 2023; Accepted: 03 July 2023; Published: 31 July 2023

Abstract: We analyzed implication of debt financing on Nigeria economic growth, by considering all the debt elements such as total external debt, FGN only, states & FCT, total domestic debt, FGN only and states & FCT, with the help of multiple regression on data covering from 2010 to 2022 and discovered that; debt finance has a positive correlation and impact on economic growth, the statistical value also reveal a very significant positive relationship among the variables at 0.0000, which negated our null hypothesis proposed above. Our model is also statistically significant with a probability level of 0.000041, at a confidence level of 87% approximately. Therefore we recommended that: Debt employed by government should be cannel into more productive sector in order to yield more positive returns; Comparative analysis, i.e., cost benefit analysis should be carryout by government officials before engaging in borrowing; and there should be proper monitoring of borrowed fund, in order to avoid diversion.

Keywords: Debt, finance and economic growth

I. Introduction

Every nation of the world has a way of keeping her economy running, over the years different approach has been adopted by economists and decision makers to keep the economy running at efficient level. While different countries of the world engage in buying and selling of commodities in order to generate most of her inflows, however in most cases this revenue fall short due to the increasing economic demand on the side of the government, hence such nation will have to other choice than to result to borrowing in order to finance her deficit budget. Although borrowing does not necessarily mean an economy has a deficit budget, an economy can borrow in most cases to finance an elephant project that they think is viable and is needed for the citizenry.
Sometimes borrowing might be encourage due to the monetary policy adopted by that economy, The valuable goals of money related approach incorporate smoothening of the business cycle, avoidance of monetary emergency and adjustment of long haul financing costs and genuine swapping scale, Abata (2012) most developing countries (Nigeria), the aim of monetary policy include, domestic price stability,