Debt Practices and Economic Development in Nigeria
Abstract
This study delves into the intricate relationship between debt practices and economic development in Nigeria. Spanning the years from 1981 to 2022, the study employs secondary data sourced from the Central Bank of Nigeria Statistical Bulletin. This article stands apart by considering both domestic and foreign debt, while also acknowledging the moderating impact of inflation rate—a dimension often neglected in prior research. The study employed the stationarity test, Johansen cointegration and error correction mechanism and analytical techniques. The study reveals that while domestic debt exerts a positive influence on human development, external debt showcases a negative correlation. Furthermore, the study underscores the adverse effect of inflation on human development, shedding light on the significance of price stability for economic progress. The recommendations drawn from the findings underscore the importance of prudent debt management, investment in domestic projects, inflation control, fiscal discipline, and long-term planning. By embracing these recommendations, Nigeria can navigate the complexities of debt practices to foster sustainable economic development and improved human well-being.
References
A. El Mahdy, N. Toraeh, and R. Osama Mohamed, “External Debt and Economic Growth in Egypt,” Rand J., vol. 36, no. 4, pp. 153–177, 2022.
J. R. Bacay, J. Diokno, K. A. Iguiz, and R. Cabauatan, “Impact of Public Debt on Economic Growth: A Panel ARDL Approach in ASEAN-5,” UJoST-Univers. J. Sci. Technol., vol. 1, no. 2, pp. 359–381, 2022.
C. Y. Naibaho, S. Rahma, and K. A. Matondang, “Effect of Foreign Debt on Economic Growth in Indonesia,” Indones. J. Adv. Res., vol. 2, no. 7, pp. 827–836, 2023.
H. J. Tama and S. Habila, “Impact of External Debt on Economic Growth in Nigeria: 1986-2019,” Am. J. Econ. Bus. Innov., vol. 1, no. 3, pp. 55–72, 2022.
C. O. Manasseh et al., “External debt and economic growth in Sub-Saharan Africa: Does governance matter?,” Plos One, vol. 17, no. 3, p. e0264082, 2022.
J. Chindengwike, “Does External Debts Promote Sustainable Economic Development in Developing Countries?,” 2022.
B. C. Chukwu, “Impact of External Debt on Economic Growth in Nigeria (1981–2020),” 2023.
J. M. Keynes, The General Theory of Employment Interest and Money. London: Macmillan, 1936.
M. F. Sharaf, “The asymmetric and threshold impact of external debt on economic growth: new evidence from Egypt,” J. Bus. Socio-Econ. Dev., vol. 2, no. 1, pp. 1–18, 2022.
M. Minsky, “Financial instability hypothesis,” Elgar Encycl. Post-Keynes. Econ., p. 168, 1982.
M. K. Ajayi and A. W. Edwusi, “Appraising the Socio-Economic and Political Policies of the Federal Government of Nigeria,” Ife Soc. Sci. Rev., vol. 25, no. 1, pp. 112–123, 2020.
W. Zhongmin, “Key Features of Social Contradictions in Modern China,” in Essentials of Governance, Brill, 2021, pp. 75–92.
O. S. Alagba and I. Eferakeya, “Effect of public debt on economic growth in Nigeria: An empirical analysis 1981-2018,” Int. J. Bus. Econ. Dev., vol. 7, no. 02, pp. 1–17, 2019.
P. M. Isibor, “Effect of governance on the relationship between external debt financing and economic growth among East Africa Community Member Countries,” Urban Finance, vol. 1, no. 17, pp. 093–101, 2019.
E. A. K. Eman and T. M. Talib, “The nonlinear effect of public debt on economic growth in Jordan over the period 1980–2018,” Int. J. Bus. Econ. Res., vol. 9, no. 2, pp. 60–67, 2020.
O. M. Eze, A. M. Nweke, and E. Atuma, “Analysis of the Effect of Exchange Rate Depreciation on Export Performance in Nigeria,” J. Econ. Discuss, vol. 10, no. 3, pp. 102–115, 2019.
S. Wanjiku, J. Maingi, and S. M. Kamau, “Effect of Kenya’s Bilateral Relations with China on Economic Growth of Kenya (2000-2015),” PhD Thesis, Kenyatta University, 2018.
P. O. Otieno, “Effect of foreign currency exchange rates on financial performance of the Banking Sector in Kenya,” PhD Thesis, University of Nairobi, 2017.
S. N. Udeh, J. I. UGWU, and I. O. Onwuka, “External debt and economic growth: The Nigeria experience,” Eur. J. Account. Audit. Finance Res., vol. 4, no. 2, pp. 33–48, 2016.
W. Easterly, The elusive quest for growth: Economists’ adventures and misadventures in the tropics. MIT Press, 2001.
C. M. Reinhart and K. S. Rogoff, “Growth in a time of debt,” Am. Econ. Rev., vol. 100, no. 2, pp. 573–578, 2010.
O. J. Blanchard, “Public debt and low interest rates,” Am. Econ. Rev., vol. 109, no. 4, pp. 1197–1229, 2019.
S. Fischer, “The role of macroeconomic factors in growth,” J. Monet. Econ., vol. 32, no. 3, pp. 485–512, 1993.
M. Bruno and W. Easterly, “Inflation crises and long-run growth,” J. Monet. Econ., vol. 41, no. 1, pp. 3–26, 1996.
R. F. Engle and C. W. Granger, “Co-integration and error correction: Representation, estimation, and testing,” Econometrica, vol. 55, no. 2, pp. 251–276, 1987.
World Bank, World Development Indicators 2022. Washington, D.C.: World Bank Publications, 2022.
Central Bank of Nigeria, Annual Economic Report 2021. Abuja: Central Bank of Nigeria, 2022.
Debt Management Office Nigeria, Annual Report and Statement of Accounts 2020. Abuja: Debt Management Office Nigeria, 2021.
O. Nwannebuike and I. Yusuf, “Public debt and economic growth in Nigeria: A comparative analysis of the military and civilian era,” in The 5 Annual International Academic Conference Proceedings, 2019, 2019, p. 267.
C. A. Ighodaro, “Debt Sustainability in Sub-Saharan Africa: Evidence from Selected Countries,” Int. J. Dev. Econ. Sustain., vol. 6, no. 3, pp. 84–98, 2018.
O. Nwamaka, O. O. Chukwunulu, and O. O. Werigbelegba, “Effect of External Debt on Economic Growth in Nigeria,” Afr. J. Econ. Sustain. Dev., vol. 2, no. 1, pp. 39–50, 2016.
S. I. Ajayi, “External Debt and Economic Growth in Sub-Saharan African Countries: An Econometric Study,” J. Econ. Stud., vol. 26, no. 3, pp. 138–152, 1999.
Copyright (c) 2024 Lawerence Obhiose, Ebere P. Ifionu, Godfrey O. Omojefe
This work is licensed under a Creative Commons Attribution 4.0 International License.
In submitting the manuscript to the Central Asian Journal of Innovations on Tourism Management and Finance, the authors certify that:
- They are authorized by their co-authors to enter into these arrangements.
- The work described has not been formally published before, except in the form of an abstract or as part of a published lecture, review, thesis, or overlay journal.
- That it is not under consideration for publication elsewhere,
- The publication has been approved by the author(s) and by responsible authorities – tacitly or explicitly – of the institutes where the work has been carried out.
- They secure the right to reproduce any material that has already been published or copyrighted elsewhere.
- They agree to the following license and copyright agreement.
License and Copyright Agreement
Authors who publish with Central Asian Journal of Innovations on Tourism Management and Finance agree to the following terms:
- Authors retain copyright and grant the Central Asian Journal of Innovations on Tourism Management and Finance right of first publication with the work simultaneously licensed under Creative Commons Attribution License (CC BY 4.0) that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this journal.
- Authors can enter into separate, additional contractual arrangements for the non-exclusive distribution of the Central Asian Journal of Innovations on Tourism Management and Finance published version of the work (e.g., post it to an institutional repository or edit it in a book), with an acknowledgment of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) before and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work.
