The Effect of Debt Burden on Economic Development in Nigeria 1980-2019

ABSTRACT:The study evaluated the effect of debt burden on economic development for the period of 1980- 2019. The data were obtained from the CBN Statistical Bulletin and analyzed using econometric methods, adopted the Ordinary Least Squares (OLS), Augmented Dickey-Fuller Unit Root test, Auto Regressive Distributed Lag Model, and Bounds Test. From the results, the mean value of external and domestic debt burden was N1.539 billion and N0.048 billion respectively. The mean school enrolment rate was 31.85% and the mean real GDP was N33, 725.22 billion. Results from the ADF test carried out revealed that the variables were stationary at the level and first difference. Results from the bound test revealed that there is a long-run relationship between per capita income and debt burden. Findings from the ARDL model revealed that external debt has a positive significant relationship with economic growth in the short run and long run. The external
debt stock of Nigeria has warranted a significant positive effect on the nation’s gross domestic product (GDP) within the period under study; the domestic debt on the other hand exerts a significant negative effect on GDP. The result of the analysis also revealed that the external debt stock of Nigeria exerts a negative and significant effect on per capita income. Based on the findings of the study, it was recommended that external debts, when compared with domestic debt should be encouraged given the positive impact on the GDP, borrowing should be done only when there is a pressing need and such loans should be sourced from within, and Debt Management
Office (DMO) should set mechanisms to ensure that loans are utilized for the purpose for which they were acquired