Greener Journal of Economics and Accountancy

Open Access

Okwu et al

Greener Journal of  Economics and Accountancy Vol. 5 (1), pp. 001-012, November 2016

 ISSN: 2354-2357 © 2015 Greener Journals

Research Paper

Manuscript Number: 101516164


(DOI: http://doi.org/10.15580/GJEA.2016.1.101516164)

 

Domestic Debt and Economic Growth in Nigeria: Data-Based Evidence

 

1*Okwu Andy Titus, 2Obiwuru Timothy Chidi,

3Obiakor Rowland Tochukwu, 4Oluwalaiye Olusola Babatunde

 

1, 3, 4Department of Economics, Babcock University, Ilishan-Remo, Ogun State, Nigeria.2Department of Actuarial Science and Insurance, Faculty of Business Administration, University of Lagos, Akoka, Lagos State, Nigeria.


Abstract


Economic literature suggests that reasonable levels of borrowings have the potentials to spur growth of the economy of a developing country. This paper employed relevant econometric analysis to examine the effects of domestic debt on economic growth in Nigeria during the 1980-2015 periods. Variables of analytic interest were real gross domestic product (RGDP) as economic growth proxy, and domestic debt stock (DDS) and domestic debt servicing expenditure (DDSE) as determinant variables; with government expenditure (GEXP) and banks’ lending rates (BLR) exerting moderating influence. Data sets on the variables were generated from relevant publications of the Central Bank of Nigeria (CBN) and National Bureau of Statistics (NBS). On individual merits of the explanatory variables, the results showed evidence of significant short- and long-run positive effect for DDS; negative effect for DDSE but insignificant negative effect for BLR.  The variables jointly exerted significant effect and exhibited considerably high power in explaining variations in growth of the economy during the period. The conclusion was that domestic debt had short- and long-run growth potentials. Thus, adequate deployment of domestic debt to key sectors of the economy was recommended for sustainable short run growth that might possible translated to long run growth.

 

Keywords: Domestic debt, Economic growth, Diagnostic analysis, Error correction mechanism.

JEL Classification: C35, C51, H63, O47

Post-review Rundown

View/get involved, click [Post-Review Page]


References


Abbas, A. and Christensen, J. (2007). The role of domestic debt markets in economic growth: Anempirical investigation for low-income countries and emerging markets. IMF Working Paper No. 07/127.

 

Abbas, S. M. (2005). Public debt, sustainability and growth in post-HIPC Sub-Saharan Africa: The role of domestic debt. Paper for GD-Net’s 2004/2005 project on macroeconomic policy challenges of low income countries.

 

Adams, C. and Chadha, B. (1991). Structural models of the dollar”, IMF Staff Paper No. 38: 525-559.

 

Adofu, I. and Abula, M. (2010). Domestic debt and Nigerian economy. Current Research. J. of Eco. Theory, 2 (1): 22 26.

 

Ajayi, L. B. and Oke, M. O. (2012). Effect of external debt on economic growth and development of Nigeria. Int’l J. of Bus. & Soc. Sci., 3 (12): 297-304.

 

Ajayi, E. A. (1989). Nigerian debt management experience. Abuja: Central Bank Nigeria.

 

Alison, J. (2003). Key issues for analyzing domestic debt sustainability. Debt Relief International Publication.

 

Amakom U. S. (2003). Nigeria public debt and economic growth: An empirical assessment of effects on poverty. Enugu, Nigeria: African Institute for Applied Economics: 1-14. https://ideas.repec.org/p/wpa/wuwppe/0508014.html. Accessed 12/10/2016.

 

Aminu, U., Ahmadu, A. H. and Salihu, M. (2013). External debt and domestic debt impact on the growth of the Nigerian economy. Int’l. J. of Edu. Research, 1 (2): 70-85.

 

Asogwa, R. C. (2008). Domestic government debt structure, risk characteristics and monetary policy conduct: Evident from Nigeria. http://www.imf.org/external/np/res/seminers/2005/macro/pdf.asogwa.pdf/, Accessed 13 June 2016.

 

Asogwa, R. C. (2005). Domestic government debt structure, risk characteristics and monetary policy conduct. USA: The McGraw- Hill Coys. Inc.

 

Blavy, R. (2006). Public debt and productivity: The difficult Quest for growth in Jamaica. IMF Working Paper No. 06/235.

 

Central Bank of Nigeria (2015). Statistical Bulletin. 21 (6), Abuja, Nigeria.

 

Central Bank of Nigeria (2010). Statistical Bulletin. 21(6), Abuja, Nigeria.

 

Central Bank of Nigeria (1999). Statistical Bulletin. 10(1), Abuja, Nigeria.

 

Christensen, J. (2004). Domestic debt market in Sub-Sahara Africa. IMF Working Paper No. 0646.

 

Debt Management Office (2015). Domestic debt stock by instruments as at 31 March 2015. https://dmo.gov.ng/debt-profile/domestic-debts/debt-stock. Accessed 28/09/2016.

 

Debt Management Office (2016), Domestic debt stock by instrument as at June 30, 2016. https://dmo.gov.ng/debt-profile/domestic-debts/debt-stock/1502-domestic-debt-stock-by instrument-as-at-30th-june-2016/file. Accessed 23/09/2016.

 

Debt Management Office (2007). Yearly analysis of change in FGN domestic debt portfolio 2005-end March 2007. Abuja, Nigeria: Debt Management Office.

 

Dickey, D. A. and Fuller, W. A. (1981). Distribution of the Estimators for Autoregressive Time Series with a Unit Root. Econometrica,  49: 1057-1072.

 

Egbetunde, T. (2012). Public debt and economic growth in Nigeria from granger causality. American J. of Econs, 2 (6): 101-106.

 

Ericsson, N. R. (1992). Cointegration, exogeneity and policy analysis: An overview. J. of Policy Modeling, 14: 251-280.

 

Granger, C. W. J. and Newbold P. (1974). Spurious regressions in econometrics. J. of Econometrics, 2(2): 111-120.

 

Greene, W. H. (2012). Econometric Analysis (7th ed.). New Jersey: Upper Saddle River, Pearson Education.

 

Hamed, A. H. Ashraf, A. and Haudhary, M. A. (2008). External debt and its impact on economic growth. International Monetary Fund. http://ideas.repec.org/a/ecm/emetrp/v55y1987i%202p25176.html/ Accessed 28/12/2015.

 

Johansen, S. (1988). Statistical analysis of co-integration vectors. J. of Eco Dynamics and Control, 12 (2–3): 231–254.

 

Kumar, M. S. and Woo, J. (2010). Public debt and growth”, IMF Working Paper No. 174: 1-45, Cambridge: Cambridge University Press.

 

Kalemli-Ozcan, S., Alfaro, L., Chanda, A., and Sayek, S. (2003). FDI and economic growth: The role of local financial markets. J. of Int’l. Econs. http://econweb.umd.edu/~kalemli/jiefinal.pdf. Accessed 12/06/2016.

 

Mbire, B. and Atingi, M. (1997). Growth and foreign debt: The Ugandan experience. African Eco Research Consortium Research Paper No. 66. Nairobi, Kenya: The African Economic Research Consortium.

 

National Bureau of Statistics (2015). Abstract of Statistics. Abuja, Nigeria: NBS.

 

National Bureau of Statistics (2010). Abstract of Statistics. Abuja, Nigeria: NBS.

 

Obiwuru, T. C., Okwu, A. T. and Ekezie, J. O. (2013).  Effects of domestic debt on economic growth of Nigeria. J. of Strategic and Int’l. Studies, IX(1): 44-60.

 

Odozi, V. A. (1996). Nigeria domestic public debt stock: An assessment. The Bullion, 20(2), Lagos: Central Bank of Nigeria.

 

Ogege, S. and Ekpudu, J. E. (2010). The effects of the debt burden on the Nigerian economy. J. of Research in National Devpt., 8 (2).

 

Omoh Gabriel (2015). N12 trillion debt profile worsens Nigeria’s woes. Vanguard Newspaper. http://www.vanguardngr.com/2015/07/n12trn-debt-profile-worsens-nigerias-woes/ Accessed 28/09/2016.

 

Onyeiwu, C. (2012). Domestic debt and the growth of Nigerian economy. Research J. of Finance and Accounting, 3 (5): 45-56.

 

Oyejide, T. A., Soyede, A. and Kayode, M. O. (2004). “Nigeria and the IMF”, Heinemann Edu. Book Nig. Ltd, Ibadan, p. 9.

 

Pattillo, C. (2002). External debt, growth, finance and development.  A Qtrly. Mag. of the IMF, Vol. 39 No 2.

 

Pereira, A. and Xu, Z. (2000). Export growth and domestic performance. Rev. Int. Econ., 8: 60- 73. http://ideas.repec.org/a/bla/reviec/v8y2000i1p60-73.html, 2000.

 

Sanusi J. O. (2003). Management of Nigeria’s Domestic Debt. Abuja: Debt Management Office.

 

Seetanah, B., Padachi, K. and Durbarry, R. (2007). External debt and economic growth: A vector Error correction approach, Int’l. J. of Bus. Research, 7 (5).

 

Solis, L. and E. Zedillo (1985). The foreign debt of Mexico. In Gordon W. S. and J. T. Cuddington (eds.). International debt and the developing countries. A Symposium; Washington D. C.: The World Bank.

 

Stock, J. H., and Watson, M. (2011). Introduction to Econometrics (3rd ed.). Boston: Pearson Education/Addison Wesley.