Effects of Public Debts on Economic Growth in Nigeria: A Cointegration Analysis
This paper examines the long-run effects of external and domestic debts on economic growth in Nigeria, using the dynamic OLS cointegration technique and data spanning 1981 to 2017. The results show that none of external and domestic debts enhances growth in Nigeria in the long run. Although domestic debt tends to have a positive long-run effect on growth, the effect is not statistically significant. On the other hand, external debt has a negative and statistically insignificant long-run effect on growth. However, when government revenues (oil and non-oil revenues) are included in the analysis, only oil revenue has a statistically significant positive effect on economic growth in the long-run, indicating the high importance of oil in Nigeria. These findings imply that the country should reduce the use of debts to finance expenditure and seek to enhance growth with oil revenue maximally without relying unnecessarily on oil. Keywords: External debt, domestic debt, economic growth, cointegration JEL Classification: H3, H6, E63