Analysis of domestic debt: implication for economic growth in Nigeria

Abstract

This paper principally analysed the importance of domestic debt on economic growth of Nigeria. The objective of the study is to investigate the relationship between government domestic debt and economic growth and policy that is likely to improve private sector investment and break growth resistance problem. To empirically determine the relationship between domestic debt and some macroeconomic variables, we employed the error correction model procedures following an examination of properties of the time series using unit root and co-integration test. Findings show that domestic debt and credit have a significant and direct relationship with GDP and that debt servicing has inverse relationship with GDP and also government expenditure has a direct but not significant relationship with GDP. The implication of the findings concludes that domestic debt should be invested in productive sector of the economy and more specifically in the real sector and further productivity gain will be achieved in the improvement on capital project expenditure.

KEYWORDS: Domestic debt, credit, servicing, investment and economic growth