PUBLIC DEBT AND MACROECONOMIC STABILITY IN NIGERIA: A TIME-SERIES ANALYSIS OF THE DEBT-GROWTH NEXUS

Authors

Keywords:

Public debt, Economic growth, Debt servicing, ARDL, Nigeria

Abstract

This study examines the impact of public debt on economic growth in Nigeria over the period 1991 to 2024 employing the Autoregressive Distributed Lag (ARDL) bounds testing approach, Error Correction Modeling (ECM), and Granger causality techniques. We identified the effects of external debt (EXD), domestic debt (DDM), debt servicing (DTS), exchange rate (EXR), and inflation (INF) on growth outcomes. Our findings highlight a dualistic debt-growth relationship: domestic debt positively and significantly affects growth in the short run (coefficient 0.0182, p<0.05), while external debt and debt servicing exert significant negative pressures, validating the Debt Overhang and Crowding-Out hypotheses. The long-run bounds test confirms a stable long-run equilibrium, with the error correction term (-0.6874) indicating a 68.74% annual adjustment speed. The Granger causality results establish unidirectional causality from external debt and debt servicing to growth, alongside significant exchange rate pass-through to inflation. Policy simulations suggest that reducing debt servicing by 10% could increase the economic growth rate by 1.5% points. Our findings contribute to the existing debt sustainability literature in resource-dependent developing economies by demonstrating the dualistic nature of debt effects. The research recommends strengthening fiscal institutions, diversifying revenue sources, and establishing debt thresholds to guide borrowing decisions.

Dimensions

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Published

2026-10-21

How to Cite

Agbabiaka, K. O., Ojo, A. F., Bakare-Aremu, T. A., Adegoke, A. K., Adekanmbi, O., & Orugun, O. A. (2026). PUBLIC DEBT AND MACROECONOMIC STABILITY IN NIGERIA: A TIME-SERIES ANALYSIS OF THE DEBT-GROWTH NEXUS. FUDMA Journal of Business Management, 4(2), 327-341. https://doi.org/10.70882/fjbm.2026.v4i2.140

Issue

Vol. 4 No. 2 (2026): FUDMA Journal of Business Management

Section

Articles
Copyright & Licensing

Copyright (c) 2026 Kamor Oladimeji Agbabiaka, Ayoala Felix Ojo, Tunde Abubakar Bakare-Aremu, Adeniji K. Adegoke, Oluyemi Adekanmbi, Olubunmi Abosede Orugun (Author)

Creative Commons License

This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.

How to Cite

Agbabiaka, K. O., Ojo, A. F., Bakare-Aremu, T. A., Adegoke, A. K., Adekanmbi, O., & Orugun, O. A. (2026). PUBLIC DEBT AND MACROECONOMIC STABILITY IN NIGERIA: A TIME-SERIES ANALYSIS OF THE DEBT-GROWTH NEXUS. FUDMA Journal of Business Management, 4(2), 327-341. https://doi.org/10.70882/fjbm.2026.v4i2.140

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