CHAPTER ONE

1.0 INTRODUCTION

1.1. Context of the Study

When a government borrows money to fill budgetary deficits or advance developmental goals, it

creates public debt, which is an essential part of a country's economic landscape. The distinction

between external and domestic debt highlights the variety of resources that governments use to

support their economies. One example is Nigeria, which struggled with a turbulent debt

trajectory until the year 2000. The nation's debt reached previously unheard-of heights as a result

of a debt crisis brought on by deficiencies in institutional and strategic frameworks. These

difficulties highlight how important it is to have strong debt management procedures and open

institutional structures.

In his groundbreaking work, Anyanwu (1997) explains public debt as a complicated network of

financial commitments that includes several domestic and international claims against the

government. This sophisticated view highlights the complexity of public debt, which goes

beyond simple financial exchanges to take into account more significant economic needs. In a

similar vein, Solidi's categorisation (2003) clarifies the complex reasons for sovereign

borrowing, which range from boosting macroeconomic expansion to addressing short-term

balance of payments imbalances. These viewpoints highlight the complex relationship between

debt dynamics and more general economic requirements, portraying public debt as a two-edged

sword with far-reaching effects..

1.2. Problem Statement

There are still many empirical gaps in the Nigerian context, despite academic efforts to clarify

the complex relationship between public debt and economic development. The intricate

relationship between Nigeria's foreign and domestic debts demands more investigation, even if

Jhigan's (2008) observations provide insightful information on the developmental goals that

drive debt growth in less developed nations. The shortcomings of traditional theories in

explaining Nigeria's debt accumulation are highlighted by Isu's criticism (1997), which calls for

a sophisticated comprehension of the underlying socioeconomic dynamics. Additionally,

Akujuobi's 2007 research clarified the disparate effects of foreign and domestic debt on Nigeria's

economic development, highlighting the necessity of detailed study catered to the unique

dynamics of each nation..

1.3. Research Questions

In light of this, this study aims to clarify the following questions:

(i) How has Nigeria's debt structure and policies changed since the 1980s, and what factors have

influenced these changes?

(ii) How much has Nigeria's economic growth trajectory been aided or hindered by public debt,

and what are the obvious causal mechanisms?

(iii) What are the obvious consequences for sustainable development, and how have debt relief

programs affected Nigeria's economy as a whole?

(iii) What complex link and observable feedback loops underlie the relationship between

Nigeria's prime lending rate and public debt dynamics?

(v) What are the observable effects on inflation dynamics and purchasing power parity of

changes in the dynamics of public debt on Nigeria's Consumer Price Index?

1.4. Objectives of the Study

This study aims to: (i) Analyse Nigeria's debt situation since the 1980s, identifying the

underlying structural dynamics and policy imperatives, in accordance with the conceptual

frameworks established by the Debt Management Office (DMO).

(ii) Dissect the causal mechanisms underlying the complex linkages between Nigeria's economic

growth trajectory and the dynamics of public debt.

(iii) Examine how debt relief programs have affected Nigeria's economy as a whole, outlining

any obvious consequences for sustainable development.

(iv) Describe the complex relationship between Nigeria's prime lending rate and public debt

dynamics, identifying the causative mechanisms and feedback loops.

(v) Analyse how changes in Nigeria's public debt relate to changes in the country's Consumer

Price Index, explaining the implications for inflation and purchasing power parity.

1.5. Hypotheses

Consistent with standard scientific investigation, this study makes the following claims:

Ho1: The amount of public debt accumulated in Nigeria has no discernible correlation with the

country's GDP.

Ho2: Nigeria's gross domestic product (GDP) trajectory is not significantly impacted by

structural changes in the country's public debt portfolio.

1.6. Justification for the Study

The reasoning for this study goes beyond scholarly discussion and spills over into the fields of

public education and policymaking. It aims to support evidence-based policymaking by

providing policymakers with empirically informed insights. Furthermore, its addition to the

body of knowledge acts as a benchmark for further research, promoting a sophisticated

comprehension of Nigeria's debt dynamics. Additionally, its public accessibility acts as a

lighthouse of knowledge, encouraging thoughtful discussion and civic involvement. Finally, its

effectiveness as a teaching tool enables students to learn more about the complex web of

economic dynamics and public debt management..

1.7. Scope of the Study

This study's scope encompasses the range of financial responsibilities held by the Federal

Government, providing a thorough understanding of Nigeria's debt management environment. It

explores the nuances of contingent liabilities, securitised domestic loans, and overseas

obligations while navigating the boundaries of macroeconomic stability and fiscal restraint.

However, it limits its analytical focus to the federal domain and avoids the complicated nuances

of sub-national debt dynamics..

1.8 Operational definition of term

PUBLIC DEBT

In contrast to government debt, also known as public interest, public debt, national debt, and

sovereign debt, the annual government budget deficit is a flow variable that is equivalent to the

difference between government receipts and spending in a single year. The debt is a stock

variable that is measured at a certain point in time and is equal to the sum of all past deficits.
INSTITUTION ACCOUNTABILITY

Since some good money is owed by national administration practice, the financial endeavours

resulting from arrears administration activities are audited by famous outside auditors as a habit

of fostering responsibility. According to the best practices suggested by each Globe Bank under

the Indebtedness Administration Depiction Estimate (DeMPA), money owing by the national

administration movement should be audited at all three (3) ages. A particular audit that was

previously carried out by the DMO need to be kept up to date. The IA & CU periodically

determine how much money is owed by national administrative movements and notify the

Manager-Comprehensive of any decisions they make. These reports come in three different

formats: twice a year, periodically, and annually. The IA & CU also reviews the Commission's

financial activities and submits authorised returns to the organization's bookkeeper-accepted and

accountant-approximate.

In general, key public service changes that were found to exist over the research period were

highlighted using five major categories. The institutional framework for implementing reforms

can be referred to as the first category, which comprises the following:

These tactics were all further divided into four primary categories, which include fiscal

management that capitalises on acquisitions, financial accountability, and accounting accuracy.

The second is responsibility, which necessitates the establishment of favourable charters, the

discipline of agreement execution, the organisation of governmental rules, and accountability

and openness in administrative activities. The second step, which was recently noted, authorises

the study's focus on the several recognised methods for attaining allure..
 CHAPTER TWO

LITERATURE REVIEW

2.1 CONCEPTUAL FRAMEWORK

Public debt is a common tactic used by governments to cover deficits and support national

development projects. Nigeria's commercial discovery of crude oil led to a mono-economic

system in which the majority of government income came from the oil industry. Due to this

structural shift, the economy was increasingly susceptible to fluctuations in the price of oil

globally, and the government had to seek alternative funding sources, such borrowing, as non-oil

revenue was insufficient.

Nigeria's debt profile became a significant concern in the 1980s as a result of its excessive

reliance on foreign loans and poorly thought out debt servicing plans. The issue was

exacerbated by unsuitable economic policies and falling oil prices. Despite several restructuring

attempts, the country's debt load remained high until the Paris Club offered a sizable debt

reduction in 2005. Since then, state borrowing has shifted, shifting between domestic and

foreign sources in response to macroeconomic and fiscal conditions..

2.1.1 Evolution of Nigeria’s Economic Structure Since Oil Discovery

Since oil was discovered in Oloibiri in 1956, Nigeria's economic structure has changed

significantly. The economy was mostly based on agriculture before this time, employing the vast

majority of people and accounting for more than 60% of GDP. A diverse, but under-

industrialized, economy was characterised by the Kano groundnut pyramids, the South-West

cocoa industry, the East's palm oil, and rubber exports (Ajakaiye & Fakiyesi, 2021).
However, the economic environment was drastically altered by the oil boom of the 1970s.

Agriculture quickly gave way to oil exports as the main source of foreign cash and government

income, creating a monoproduct economy that is mostly reliant on crude oil. The enormous

influx of petrodollars skewed relative pricing, decreased incentives to invest in other productive

sectors, and promoted import reliance (Iyoha & Oriakhi, 2020). Nigeria is very vulnerable to

changes in the price of oil globally and economic shocks as a result of its over-reliance on it..

2.1.2 Concept of Public Debt

"Money owed by country" is the total amount of money that a management has collected via

internal and external appropriations to pay for ongoing payments, educational programs, and

budget deficits. It covers any commitments that need future principle and/or interest payments to

be paid to both local and international creditors (Owolabi & Olayemi, 2022).

Household and exterior responsibilities are the two main types of debt owed by a country.

Household arrears are raised within ethnic borders through agents like coffer bills, exchequer

bonds, and administration growth stocks, whereas extrinsic credit refers to loans obtained from

foreign creditors through multilateral organisations (like the IMF and the Globe Bank), mutual

lenders (like the Paris Club), and marketing commercial markets (like Eurobonds and related

loans).

When used appropriately, debt may promote economic expansion by funding the construction of

infrastructure and profitable ventures. However, excessive accumulation in the absence of

corresponding economic gains can result in macroeconomic instability, high debt servicing costs,

and a debt overhang (Ajayi & Ayodele, 2023)..

2.1.3 Structure and Components of Public Debt in Nigeria

Nigeria's debt is split between external and internal entities, each of which has its own resources,

infrastructure, and connections. Bank bonds, Allied Administration bonds, and coffer bills are

only a few of the short- and long-term funding methods used for household payments. The

Regional Bank of Nigeria (CBN) distributes them for a single Bill Administration Commission

(DMO) and frequently mentions them in local bills.

Extrinsic damage can also refer to responsibilities to international monetary organisations (like

the IMF and AfDB), private bondholders (like Eurobonds), and mutual lenders (like the Paris

and London Clubs). The country is exposed to currency rate risks when the obligation stock is

denominated in a foreign currency, often USD, EUR, or GBP.

According to the DMO, Nigeria's entire public debt stock was over 97 trillion naira as of 2024,

of which 38.9% was from external debt and 61.1% was from domestic debt. Given the risks of

borrowing from outside sources, including currency devaluation, rising interest rates worldwide,

and conditions connected to external loans, this pattern illustrates Nigeria's growing reliance on

local markets (DMO, 2024)..

2.1.4 Economic Growth and Development: Conceptual Clarification

A financial tumour is the consistent rise in savings for goods and services, which is primarily

shown by the GDP growth rate. The term "progress" describes the greater likelihood of

outcomes from thrift and is commonly associated with advancements in service, profits,

financing, and consumption.

However, economic development has more aspects than only GDP. It encompasses poverty

alleviation, human capital development, institutional strengthening, better healthcare, higher

educational attainment, and structural change. Development entails a qualitative increase in the

population's economic prospects and level of living (Todaro & Smith, 2021).

Nigeria's economic development has been extremely erratic and frequently fuelled by issues

relating to oil rather than widespread increases in productivity. Because of the recession,

insecurity, inflation, and COVID-19 shocks, Nigeria's economy has fallen to an average growth

rate of 2.5% since 2015, after growing at an annual rate of 5–7% during the oil boom in the early

2000s (NBS, 2023).

The ongoing difficulty in converting economic expansion into development highlights the

Nigerian economy's fundamental flaws, which include deteriorating infrastructure, corruption,

poor governance, and high debt servicing costs..

2.2 THEORETICAL FRAMEWORK

The justification for public debt and its impact on the economy are supported by a number of

economic theories. According to the Debt Overhang Theory, investors are deterred from

investing in significant sums of debt because they expect future tax rises to pay down the debt.

According to the Solow Growth Model, public debt may be advantageous if it is used to fund

productive investments. According to Ricardian Equivalence, since rational agents foresee

future taxes, government borrowing has no impact on demand. Every theory offers a different

perspective for assessing the dynamics of Nigeria's debt and the efficacy of its policies.

Analysing the dynamics of public debt and its effect on economic growth is made possible by

the theoretical framework. Different viewpoints on the effects of government borrowing, debt

accumulation, and debt sustainability are offered by a number of traditional and modern

economic theories..
2.2.1 Classical Theory of Public Debt

Adam Smith, David Ricardo, and Jean-Baptiste Say were among the classical economists who

typically had a sceptical view of governmental debt. This school of thought holds that

government borrowing distorts the market equilibrium and raises interest rates, which

discourages private investment. They promoted a balanced budget as a means of achieving

economic stability and stressed the need for less government involvement in economic matters

(Smith, 1776; Ricardo, 1817).

This theory views public debt as a shift of resources from private, productive use to public

consumption, which is inefficient. According to the hypothesis, borrowing results in higher

taxes down the road, which might lessen incentives to invest and labour, so preventing long-term

economic progress.

Nigerian implications: According to this viewpoint, Nigeria's over dependence on public debt

would hinder long-term economic efficiency and discourage private sector investment,

particularly for consumption and ongoing expenses..

2.2.2 Keynesian Debt Theory

John Maynard Keynes' Keynesian theory, which opposes the Classical perspective, advocates

public borrowing, especially in times of economic recession. When private investment is poor,

Keynesians contend that government borrowing may be an effective fiscal policy instrument for

generating demand, jobs, and economic activity (Keynes, 1936).

This idea states that when public debt is utilised for innovative, productive investments like

infrastructure, health care, and education, deficit financing is acceptable. It implies that national

income and aggregate demand may be multiplied by such expenditures.

Nigerian implications: Nigeria may be able to promote economic growth and development if it

borrows money to fund important capital projects and infrastructure. But when borrowed money

is misused or diverted from capital investments to consumption, the anticipated Keynesian gains

are negated..

2.2.3 Debt Overhang Theory

The Debt Overhang Theory, developed in the 1980s by Krugman (1988) and Sachs (1989), states

that when a country's debt load exceeds its capacity to pay it back, it discourages both foreign

and domestic investment. The theory states that potential investors would be discouraged from

investing if they think the gains will be heavily taxed in order to settle existing obligations.

A debt overhang can lead to a vicious cycle in which a large debt load deters investment,

impedes economic expansion, and makes the debt load worse. The nation finds itself in a

predicament where it cannot expand its economy enough to pay off its debt, which raises the risk

of default.

Nigerian implications: The potential of debt overhang is becoming more apparent as Nigeria's

debt service-to-revenue ratio has risen to above 70% in recent years (IMF, 2024). It calls into

question whether the nation's public debt can be sustained and how it will affect both local and

international investment..

2.2.4 Ricardian Equivalence Hypothesis

According to the Ricardian Equivalence Hypothesis (REH), which was initially proposed by

David Ricardo and later formalised by Robert Barro in 1974, it is irrelevant whether a

government finances its spending with debt or taxes. Reasonable households anticipate future

tax increases as a result of government debt. As a result, they raise reserves to fund upcoming
tax payments while maintaining overall demand. Essentially, since individuals modify their

behaviour to counteract government policies, borrowing by the government does not increase

demand.

Evaluation and Relevance to Nigeria: In emerging economies like as Nigeria, where financial

literacy is poor, credit markets are weak, and income levels are unequal, the REH assumptions—

perfect capital markets, forward-looking rational agents, and intergenerational altruism—are

frequently unrealistic. Consequently, it is doubtful that the equivalency will hold in actual use..

2.2.5 Crowding-Out vs. Crowding-In Effects

A hypothesis known as the "crowding-out effect" is consistent with classical theory and

postulates that rising public borrowing raises interest rates, which deters private investment.

When governments borrow from domestic markets with little capital, this effect is more

noticeable.

On the other hand, the "crowding-in effect" appears under Keynesian settings, where government

infrastructure spending may lower operating costs, boost private sector activity, and attract

further investment.

Setting the Scene for Nigeria: Nigeria's domestic borrowing through treasury bills and bonds

may make it more difficult for the private sector to obtain credit, particularly if the government

raises interest rates to draw in capital. However, the borrowed money may attract private

investment and boost productivity if it is used to upgrade the transportation, electricity, and road

infrastructure.

Every one of these ideas offers a different perspective on how public debt and economic success

are related. The Keynesian and crowding-in models encourage the use of debt to spur growth, so
long as the money is spent wisely, whereas the Classical and Debt Overhang theories caution

against excessive borrowing. Although it provides a theoretical standard, the Ricardian

Equivalency is not very applicable in low-income countries such as Nigeria.

The new analysis is more in line with the Keynesian and Debt Overhang frameworks, analysing

potential short-term advantages under productive spending while concentrating on how debt, if

not managed well, might impede economic development over the long run..

2.3 NATURE AND STRUCTURE OF NIGERIA’S PUBLIC DEBT

Nigerian public debt may be essentially divided into two categories: external debt and domestic

debt. Treasury Bills, Bonds, and Sukuk issued domestically and bought by regional investors are

examples of domestic debt. Eurobonds, bilateral agreements, and loans from international

organisations make up external debt.

Beginning with development stocks in the 1960s, domestic debt has expanded to encompass

increasingly intricate financial products such as FGN Bonds. Concessional bilateral and

multilateral loans were the main source of external debt in the past, but commercial

borrowings like Eurobonds are now included. According to the DMO's 2023 forecast, the entire

debt profile surpassed ₦87 trillion, which raised questions about sustainability.

Nigeria's public debt has changed throughout time, reflecting changes in domestic policy

decisions, international economic conditions, and the goals of succeeding administrations.

Nigeria's debt path is characterised by periods of boom, mismanagement, restructuring, and

revival, starting with modest post-independence borrowing and progressing to massive foreign

debt accumulation in the 1980s and final debt relief in the mid-2000s..
2.3.1 Pre-Structural Adjustment Era (Before 1986)

Nigeria's state debt was minimal in the years immediately after its independence in 1960 and

was mostly used for development initiatives, particularly in the fields of infrastructure,

agriculture, and education. The federal government primarily raised domestic debt through the

issuance of treasury securities and development stocks, with very little external borrowing.

The post-civil war reconstruction phase (1970–1975) saw the beginning of significant rises in

borrowing, which accelerated during the oil boom years (mid-1970s). However, budgetary

laxity resulted from the oil windfall. In addition to implementing ambitious development

programs, such as the Third National Development Plan (1975–1980), which was largely funded

by external loans, the government expanded the public sector significantly.

Due to the decline in world oil prices in the early 1980s, the government was unable to fulfil its

international commitments, which resulted in a buildup of arrears and ultimately default..

2.3.2 Structural Adjustment Program and Debt Explosion (1986–1999)

An important turning point in Nigeria's debt trajectory was the 1986 implementation of the

Structural Adjustment Program (SAP), which was overseen by the World Bank and the

International Monetary Fund (IMF). SAP encouraged currency depreciation, market

liberalisation, and privatisation, but it also resulted in large external borrowing to fund

economic changes.

Nigeria owed $19 billion in total external debt by 1985. In order to fund public expenditure

and finance balance of payments deficits in the face of diminishing oil income, Nigeria saw a
dramatic increase in foreign borrowing between 1986 and 1994, especially from bilateral and

multilateral sources (Ogun, 2021).

Debt servicing commitments skyrocketed at this time, eating up an increasing portion of export

revenue. Nigeria's inability to produce enough foreign cash resulted in an unmanageable debt

load and growing arrears. Paris Club commitments accounted for the majority of the external

debt stock, which topped $30 billion by 1999..

2.3.3 Debt Relief and the Paris Club Exit (2000–2006)

Nigeria stepped its efforts to obtain debt relief when democratic rule was restored in 1999. A

historic debt agreement with the Paris Club of creditors in 2005–2006 was the result of their

efforts. As part of the agreement, Nigeria agreed to wipe off $18 billion of its $30 billion debt in

return for repaying $12 billion.

This was a historic accomplishment that greatly decreased Nigeria's foreign debt load. The

nation's external debt decreased to little over $3 billion by 2006, with the majority of its debt

coming from multilateral loans and very little from bilateral commitments.

In addition to restoring Nigeria's credibility, the debt relief enabled the government to redirect

funds that had been set aside for debt repayment to programs aimed at reducing poverty,

promoting education, and improving health. The establishment of the Debt Management Office

(DMO) in 2000 improved the institution's ability to manage debt and evaluate sustainability.

2.3.4 Post-Relief Debt Resurgence and Current Dynamics (2007–2024)

Nigeria went into a new phase of cautious borrowing after the debt relief era. Treasury Bills,

Sukuk Bonds, and Federal Government Bonds were the primary domestic debt instruments

used by the government to cover budget shortfalls. This modification resulted in increased

local interest payments but also helped reduce foreign currency concerns.

Nigeria gradually started borrowing money from outside sources again in 2010, particularly

through the issuing of Eurobonds and concessional loans from the African Development Bank

and the World Bank. These monies were utilised for social intervention initiatives, electricity

sector reforms, and infrastructure development.

The overall amount of governmental debt has increased to ₦12.6 trillion by December 2015.

The 2016 oil price collapse and subsequent recession were the main causes of this increasing

trend.

During the COVID-19 epidemic in 2020–2021, emergency borrowing was necessary.

Low performance in non-oil revenue and growing budget deficits.

The Debt Management Office (DMO) reports that as of Q1 2024, Nigeria's total governmental

debt was 97.34 trillion, of which 38.9% was external debt and around 61.1% was domestic debt

(DMO, 2024). This era's salient characteristics include:

Eurobonds are accumulating quickly (more than $15 billion).

obtaining loans from international organisations (such as the World Bank and the IMF RFI

loan).

raised the debt service-to-revenue ratio, which in 2023 was 73.5% (IMF, 2024)..
2.3.5 Key Concerns from Nigeria’s Debt History

1. Borrowing repeatedly for repeated expenses

The use of debt to finance ongoing expenses rather than worthwhile capital initiatives has

been a significant weakness.

2. Inadequate Project-Debt Connections

Since many loans are not immediately linked to observable or bankable projects, it can be

challenging to track down returns.

3. Poor Basis of Revenue

The sustainability of debt is made worse by Nigeria's inadequate tax structure and excessive

reliance on oil income.

4. Growing Burden of Debt Service

Debt servicing is taking up an increasing amount of the national budget, which leaves less

money available for social services and capital projects.

5. Insufficient Financial Self-Control

The advantages of borrowing have been diminished by lax fiscal regulations and inadequate

public financial management techniques..

2.4 CLASSIFICATION OF NIGERIA’S PUBLIC DEBT

Nigerian public borrowing is motivated by a number of factors, including funding budget

deficits, promoting economic expansion, reacting to shocks to the economy (such as the fall of

the oil price or COVID-19), and funding infrastructure initiatives. However, because to

corruption, misaligned projects, and expensive loan payment costs, borrowing hasn't always

resulted in better development outcomes.

Borrowing has become unavoidable due to factors including declining oil revenue, increasing

recurring expenses, and security concerns. The difficulty, though, is in making sure that the

borrowed money is effectively utilised to provide returns that outweigh the cost of borrowing.

Nigeria's state debt may be roughly divided into two categories: external debt and domestic

debt. Each has unique tools, features, and management consequences for the macroeconomy.

A thorough examination of these categories, the types of debt instruments, important

creditors, and current developments in debt sustainability are given in this section..

2.4.1 Domestic Debt: Instruments, Sources, and Features

The Nigerian government's commitments to regional creditors inside its boundaries are

referred to as domestic debt. Usually issued and serviced in naira, these are overseen by the

Debt Management Office (DMO) and the Central Bank of Nigeria (CBN).

Important Domestic Debt Instruments:

Treasury Bills (T-Bills) are short-term financial instruments that are issued to finance short-term

obligations. They have a duration of 91 to 364 days.

 Federal Government Bonds: Long-term securities issued to finance capital projects and

refinance maturing commitments, with maturities ranging from two to thirty years.

Development stocks are legacy financial instruments that were issued to finance economic

development initiatives in previous decades.

Islamic bonds with no interest that are linked to infrastructure projects are called Sukuk bonds.

Government IOUs issued to satisfy unpaid debts to exporters, oil marketers, and contractors

are known as promissory notes.

Depository Money Banks (DMBs) are important domestic creditors.

Administrators of Pension Funds (PFAs)

Insurance Providers

Institutional Investors and the CBN

Trends in Domestic Debt: Nigeria's domestic debt stock, which represents more than 60% of

the country's total public debt as of 2024, is estimated to be ₦59.45 trillion. Despite ongoing

worries about rising local interest rates and the potential effects on monetary policy, the DMO

says that investor confidence in government bonds is growing (DMO, 2024).

Repercussions:

By increasing interest rates, excessive domestic borrowing may dissuade private investment.

Compared to concessional international loans, local borrowing lowers exchange rate risk but

increases the expense of debt repayment because of higher interest rates..

2.4.2 External Debt: Sources, Creditors, and Conditions

The entire amount Nigeria owes international creditors, expressed in currencies such the US

dollar, euro, and Chinese yuan, is known as its external debt. It is obtained to fund budget

support, foreign exchange reserves, and capital-intensive projects.

Types of External Debt:

Multilateral loans: From organisations such as the IFAD, AfDB, IMF, and World Bank. These

frequently have favourable conditions, such as extended payback periods and cheap interest

rates.

Bilateral Loans: From specific nations like France, Germany, India, and China.

Commercial loans, including Eurobonds, Diaspora Bonds, and syndicated loans, are sourced

from the International Capital Market (ICM).

Export Credit Agencies (ECAs): Provide loans for the importation of goods and services that are

connected to business dealings.

As of 2024, the World Bank (IDA and IBRD) and the International Monetary Fund (IMF) China

(Exim Bank of China) are the main creditors.

Holders of Eurobonds issued by the African Development Bank (AfDB) (ICM investors)

Trends in foreign Debt As of Q1 2024, Nigeria owed $44.1 billion (₦37.89 trillion) in foreign

debt, of which 47.6% was from multilateral loans, 12.7% was from bilateral loans, and 39.7%

was from commercial debt (Eurobonds) (DMO, 2024). Because of its shorter maturity periods

and higher interest rates, the growing proportion of commercial debt is concerning.
Associated Risks:

exposure to fluctuations in currency rates.

higher risk of refinancing.

bilateral loans with conditionalities and tied assistance.

Chinese loans that are opaque and contain asset-backed provisions.

2.4.3 Comparative Analysis of Domestic and External Debt

Criteria111 Domestic Debt111 External Debt111

Currency1Denomination1 Nigerian1Naira1 (₦)1 Foreign1currencies1

(USD, EUR, CNY)

Major1Creditors Local1banks, 1pension Multilateral1institutions,

funds, 1CBN bilateral1donors

Cost1of1Borrowing Relatively1high1 (10– Concessional1or

18%) commercial1rates (2–9%)

Risk1Exposure Low exchange rate risk; High forex risk; variable

high interest cost interest terms

Market1Liquidity High1and1accessible Depends1on1global

through1regularvauctions markets1and1country

risk1ratings

Usage1Justification Budget1support and1debt Infrastructure1financing,

 refinancing111 budget1support

2.4.4 Nigeria’s Debt Sustainability Outlook

The ability of the nation to repay its debt without jeopardising its long-term economic

development or fiscal stability is known as debt sustainability. The DMO assesses the

sustainability of debt using the following key indicators:

Nigeria's debt-to-GDP ratio was 46.4% in the first quarter of 2024, which is below the IMF's 70%

criterion for developing nations but on the rise.

The most concerning number is the debt service-to-revenue ratio, which peaked at 73.5% in

2023 and indicates inadequate revenue and a potential fiscal catastrophe (IMF, 2024).

Foreign Debt Service: Each year, more than $4 billion is set aside to pay back multilateral loans

and Eurobonds, which drains foreign reserves.

Challenges: Capital expenditures are being crowded out by heavy debt payment.

low tax-to-GDP ratio (8% as of 2023) and non-oil income base.

For more than ten years, budget deficits have been growing.

inadequate project oversight and underuse of borrowed cash.

Scholarly Policy Recommendations:

Move your financing towards longer-term concessional sources.

improve debt transparency and public financial management.

Increase domestic revenue collection by implementing tax reform.

Prioritise capital investments that will spur growth and reduce debt-financed ongoing

spending..

2.5 DETERMINANTS AND DRIVERS OF PUBLIC DEBT ACCUMULATION IN NIGERIA

It is essential to comprehend the fundamental causes of Nigeria's growing public debt in order

to assess its sustainability and long-term effects. These factors, which include fiscal imbalances,

poor revenue production, macroeconomic instability, institutional flaws, and governance

deficiencies, are both structural and cyclical..

2.5.1 Persistent Budget Deficits and Fiscal Imbalance

Nigeria's persistent fiscal imbalance, which occurs when government spending continuously

exceeds receipts, is one of the main causes of the country's mounting public debt. Nigeria has

consistently had budget deficits since 1999, which are mostly funded by borrowing from both

internal and foreign sources.

The causes of budget shortfalls include:

Overspending on ongoing expenses (wages, subsidies, overheads)

Poor revenue collecting performance

Volatility of oil prices

Expensive social intervention and security initiatives

For instance, the Fiscal Responsibility Act's 3% cap was significantly exceeded by the 2023

budget deficit, which was estimated to be ₦11.3 trillion, or 5.03% of GDP (FGN Budget Office,

2023). Due to the necessity of borrowing heavily to fill the shortfall, debt accumulated quickly..

2.5.2 Weak Revenue Base and Overdependence on Oil

Nigeria's income profile is limited and extremely susceptible to changes in the price of oil. Over

85% of export revenues and almost 70% of government income come from the oil industry

(CBN, 2023). The vulnerability of this reliance was revealed by the global oil price drop in 2016

and again during the COVID-19 epidemic.

Revenue from sources other than oil, such as taxes, levies, and customs fees, is still lacking. In

2022, Nigeria's tax-to-GDP ratio was only 8%, which was much lower than the 16.5% average

for Africa (OECD, 2023). As a result, the government has little budgetary room and must rely on

debt to pay its debts.

Among the elements causing revenue weakness are:

sizable unorganised sector

Pervasive tax evasion

Ineffective tax management

Opposition to tax reform on a political level

2.5.3 Exchange Rate Instability and Currency Depreciation

Nigeria's debt payment costs are greatly impacted by exchange rate fluctuation since it borrows

money from outside sources in foreign currencies. The local currency value of external debt

commitments rises when the naira depreciates, placing strain on foreign reserves and

government coffers.

In the parallel market, the naira fell from ₦197/$1 in 2015 to approximately ₦1,400/$1 in 2024

as a result of diminishing oil inflows, capital flight, and inconsistent central bank policies.

Because of this, even when the nominal value of foreign loans stays the same, external debt

payment requirements have increased dramatically..

2.5.4 Interest Rate Regime and Cost of Borrowing

Borrowing in the local market has become costly due to high domestic interest rates. Over the

past three years, the Central Bank's monetary policy rate (MPR) has fluctuated between 11.5%

to 24.75% (CBN, 2024), while government securities have yields ranging from 10% to 18%.

This has consequences for:

Increased expenses for repaying domestic debt

More money borrowed to pay down maturing obligations

Higher rates on government assets are pushing away private sector borrowers.

Furthermore, Nigeria's sovereign credit risk and the global financial tightening make Eurobond

issuances on the international market more attractive to investors..

2.5.5 Global Economic Shocks and External Borrowing Pressures

Additionally, worldwide macroeconomic shocks have influenced Nigeria's debt profile:

The worldwide financial crisis of 2008

The oil price collapse of 2014–2016

The 2020–2021 COVID-19 pandemic

The war between Russia and Ukraine and the rise in global inflation

Large-scale borrowing was necessary to stabilise the economy as a result of each of these

incidents. To lessen the effects of COVID-19, for example, Nigeria obtained a $3.4 billion IMF

Rapid Financing Instrument (RFI) loan in 2020. Similar bilateral and multilateral loans ensued,

which fuelled the growth of debt..

2.5.6 Security Challenges and Emergency Spending

The government has been obliged to increase defence and emergency spending due to the

rising costs of dealing with insecurity, particularly insurgency in the North-East, banditry in the

North-West, and oil theft in the Niger Delta. Security spending, which is frequently funded by

borrowing, raises budgetary pressure without having any long-term growth consequences since

it is not economically productive..

2.5.7 Institutional and Governance Weaknesses

A number of governance issues make the issue of debt buildup worse:

Low capital budget execution rates and inadequate budget implementation are signs of weak

public financial management (PFM).

Corruption & Lack of Transparency: Money borrowed for development and infrastructure

projects is occasionally embezzled or stolen.

Insufficient Debt Project Linkage: A large number of loans are not connected to particular

projects that generate income.

Inconsistencies in policy: Regular changes to macroeconomic policies discourage investment

and make budgeting more difficult..

2.5.8 Socio-Political Pressures and Populist Spending

Nigeria's political system, which includes federalism and election cycles, frequently encourages

unsustainable populist economic practices including expanding subsidies, employing public

employees, and spending for political reasons.

Spending financed by deficits tends to increase during election years as political leaders put

short-term profits ahead of long-term financial stability. The public debt load is made worse by

this cyclical behaviour without commensurate increases in infrastructure or production.

Final Thoughts on Debt Drivers

Nigeria's debt buildup is fuelled by a complex interplay of fundamental economic issues,

institutional deficiencies, international economic pressures, and local policy blunders. Even if

borrowing would still be required to close development gaps, the current course raises severe
questions regarding sustainability, particularly in light of the high cost of servicing and

inadequate income mobilisation..

2.6 IMPACT OF PUBLIC DEBT ON THE NIGERIAN ECONOMY

Effective management and wise use of public debt can act as a stimulant for economic change.

But in Nigeria's instance, debt has turned into a macroeconomic weakness as well as a

requirement for funding. Using actual data, economic reasoning, and observations unique to

each nation, this section examines the multifaceted effects of public debt on important

economic indicators..

2.6.1 Effect on Economic Growth and Development

There has been much scholarly investigation on the connection between Nigeria's state debt

and economic expansion. Theoretically, borrowing should promote growth when it is used for

productive capital projects like technology, infrastructure, and education.

Nonetheless, actual data about Nigeria indicates a mixed result:

Spending supported by debt may, in the near run, result in moderate GDP benefits, particularly

during times driven by infrastructure (e.g., 2013–2015).

Because of inadequate governance, large debt payment commitments, and inefficient resource

allocation, excessive debt levels eventually have a negative impact on growth.

According to studies like Obademi (2012) and Okonjo-Iweala et al. (2021), Nigeria's debt

service-to-revenue ratio, which sometimes surpasses 70%, has become a growth inhibitor even

though the country's debt-to-GDP ratio may not be particularly high on its own. High debt
repayment limits the amount of money available for vital investments in agriculture, power,

and health..

2.6.2 Impact on Inflation

Inflationary consequences may result from public debt, particularly if the Central Bank of

Nigeria (CBN) finances it through monetary accommodation. This is seen in Nigeria during

periods when the CBN used loans to monetise budget shortfalls, which increased the money

supply and increased inflationary pressures.

Nigeria's inflation rate increased from 15.6% to over 33.69% between 2021 and 2024, partly

due to: Excessive liquidity from debt monetisation.

implications of foreign loan repayments on exchange rates.

supply-side limitations made worse by the actual economy's underinvestment.

Therefore, structural inflation is indirectly caused by public debt, which reduces buying power

and increases poverty..

2.6.3 Effect on Investment and Private Sector Participation

Private investment is frequently crowded out when the government borrows too much

domestically. This occurs when commercial banks and institutional investors are drawn away

from lending to the real sector by the high returns on government securities (such as bonds and

treasury bills).
Among the repercussions are:

high borrowing costs for individual companies.

Entrepreneurial activity has decreased.

SME growth and industrialisation are slow.

Nigeria's domestic debt crowding-out effects have slowed the expansion of private credit,

according to the World Bank (2023), with private sector credit making up just 14% of GDP, far

less than emerging market norms..

2.6.4 Employment and Poverty Implications

Debt has a substantial indirect effect on employment and poverty levels:

Job creation stalls when debt is utilised to pay off current debt or finance consumption rather

than investing in productive industries.

More people fall below the poverty line as a result of growing living expenses and real wage

loss brought on by high inflation from debt monetisation.

Nigeria's unemployment rate increased to 5.0%, but young underemployment is still at 17.9%,

according to NBS (2024). At the same time, more than 133 million Nigerians are living in

multifaceted poverty, a large portion of which is caused by misallocated budgetary priorities.

Guy

2.6.5 Exchange Rate and External Sector Vulnerability

Nigeria is vulnerable to currency rate risk as a result of its growing external debt, as was

mentioned in previous sections, particularly when foreign inflows are insufficient to cover

commitments.

Among the effects are:

depletion of foreign funds to pay down multilateral loans and Eurobond coupons.

Depreciation of the naira increases the value of debt denominated in dollars in local currency.

pressure on the CBN to protect the naira, sometimes by implementing unsustainable

interventionist measures.

As a result, the exchange rate market is extremely volatile, which deters FDI and undermines

corporate trust..

2.6.6 Debt Servicing and Fiscal Crisis

Nigeria's growing debt payment load is perhaps the most pressing macroeconomic issue.

About 73.5% of government revenue was spent on debt payment in 2023, which left little

money for social initiatives or capital projects.

Nigeria runs the risk of getting into a debt trap if this trend keeps up, where fresh loans are

mostly used to pay off old debts.

Future borrowing costs might increase if credit ratings drop.

Without immediate budgetary measures, sovereign default or restructuring could become

inevitable..
2.6.7 Creditworthiness and Sovereign Risk

Nigeria's creditworthiness is called into doubt by its high debt levels. Nigeria has been given a

negative outlook by sovereign credit rating firms such as Moody's, Fitch, and S&P because of:

growing budget imbalances.

underperformance in revenue.

declining macroeconomic principles.

A rise in sovereign risk has resulted in:

decreased trust among investors.

Eurobonds have higher risk premiums..

Shrinking access to concessional borrowing windows.

2.6.8 Social Spending and Human Development

Nigeria's creditworthiness is called into doubt by its high debt levels. Nigeria has been given a

negative outlook by sovereign credit rating firms such as Moody's, Fitch, and S&P because of:

growing budget imbalances.

underperformance in revenue.

declining macroeconomic principles.

A rise in sovereign risk has resulted in:

decreased trust among investors.

Eurobonds have higher risk premiums..

What is required is a comprehensive debt management strategy, backed by fiscal discipline,

institutional transparency, and pro-growth investments.

2.7 EMPIRICAL REVIEW

This section offers a thorough review of current empirical research that looks at the connection

between Nigeria's governmental debt and economic expansion. The goal is to document

current research from 2020 to 2025 as it relates to consensus, divergence, methodology,

findings, and gaps.

Every research is examined using the framework below:

Title and Author(s) | Year | Theory Employed | Approached | Key Findings

1. "Public Debt and Macroeconomic Stability in Nigeria" by Adebayo, O. and Yakubu, S.

2020

Debt Overhang Theory Theory in Practice: Autoregressive Distributed Lag (ARDL) Bounds

Testing Methodology

Results: The study concluded that public debt has a detrimental long-term effect on

macroeconomic stability, particularly on exchange rate volatility and inflation. However,

because it is concessional, external debt was determined to have little effect in the near term.

2. "External Debt, Domestic Debt, and Economic Growth Nexus in Nigeria" by Okonkwo, J. &

Adeyemi, A.
Year: 2021; Solow Growth Theory Used Vector Error Correction Model (VECM) is the theory

methodology.

Results: While external debt had a negative long-term influence on GDP growth, domestic debt

had a beneficial short-term effect. To reduce currency risk, the authors advise enhancing debt

transparency and concentrating on domestic debt restructuring.

3. Uche, I. "Debt Service Burden and Government Capital Expenditure in Nigeria" Year: 2022;

Fiscal Space Hypothesis as the Theory Under Application

Methodology: OLS Regression and Cointegration Analysis

Results: According to the study, a 1% increase in debt service results in a 0.6% decrease in

capital project allocation, indicating that growing debt service requirements substantially crowd

out capital investment. The report issues a warning about an impending problem in

infrastructure funding.

4. "Public Debt and Human Development in Nigeria" by Ibrahim, T., and Hassan, R.

The year is 2022.

Theory Applied: Endogenous Growth Theory Methodology: Dynamic Panel Regression (GMM)

Results: High levels of public debt were shown to be negatively correlated with Human

Development Index (HDI) scores. The writers underlined the necessity of more investment in

health and education as well as more effective debt utilisation.

5. Nwachukwu, K. & Fagbemi, T. – “Fiscal Deficit, Debt Sustainability and Economic

Performance in Nigeria”
The year is 2023.

Theory Used: Structural Vector Autoregression (SVAR) Methodology: Ricardian Equivalence

Hypothesis

Findings: The results demonstrated that fiscal deficits financed by debt had a delayed negative

effect on growth, with sustainability concerns growing as debt approaches 50% of GDP. The

writers advocate for better fiscal regulations and the imposition of debt limitations.

6. "Impact of External Debt on Exchange Rate and Inflation in Nigeria" by Ojo, M. & Eze, B.

The year is 2024.

Applying Theory: A Monetary Perspective on the Balance of Payments

Methods: Granger Causality Test and ARDL

Results: Particularly during global shocks, there is a high correlation between external debt and

increases in inflation and naira devaluation. To reduce pressure, the report suggests expanding

export capabilities and restricting the reach of foreign commercial borrowing.

7. "Debt Accumulation and Economic Growth in Nigeria: A Quantile Regression Approach" by

Salami, D. and Adamu, M.

The year is 2025.

Methodology: Quantile Regression Analysis; Theory Used: Debt Laffer Curve Hypothesis

Results: Growth and debt have a nonlinear connection. At lower levels, public debt

encourages growth; but, when it reaches a certain threshold (debt-to-GDP > 45%), it becomes
detrimental. The authors make the case for a change to performance-linked borrowing and

quality-based debt planning.

Combining Empirical Results

Based on the examined empirical evidence:

Everyone agrees that external debt, especially non-concessional and commercial borrowing,

presents serious threats to macroeconomic stability and prosperity.

Particularly when associated with capital projects that are productive, domestic debt seems to

have short-term stimulatory benefits.

The majority of academics point to growing debt service-to-revenue ratios, poor project-debt

linkage, and budgetary indiscipline as major impediments.

Studies that incorporate data from after 2023, such as recent Eurobond issuances, IMF standby

agreements, and the consequences of exchange rate unification, are lacking, nonetheless. This

research aims to close that gap..

2.8 IMPLICATIONS OF THE LITERATURE REVIEW

Several important findings that form the basis of the current study are presented by the review

of conceptual, theoretical, and empirical literature on public debt and its effects on the Nigerian

economy. This section summarises those findings, points up areas for further study, and argues

that the current study is pertinent..

2.8.1 Key Takeaways from Conceptual and Theoretical Literature

It is clear from the conceptual assessment that public debt, whether foreign or domestic, has

two functions in economic management. Although it may be an essential instrument for

growth, if it is not properly managed, it also presents serious macrofinancial dangers.

Important ideas like crowding-out effects, debt sustainability, and fiscal supremacy highlight

how crucial it is to use debt responsibly.

Divergent perspectives on the relationship between debt and growth are provided by

theoretical frameworks such as the Ricardian Equivalence Hypothesis, the Solow Growth

Model, and the Debt Overhang Theory. Nonetheless, the majority of models agree on one

fundamental idea: the efficiency of public debt is mostly determined by how it is used, the

circumstances surrounding its creation, and the economy's ability to repay it without

compromising development goals..

2.8.2 Insights from Empirical Literature

According to empirical research conducted between 2020 and 2025, public debt has a negative

or neutral long-term impact on Nigeria's economic growth, particularly when debt payment

costs displace capital expenditures or lead to inflationary finance. The debt service-to-revenue

ratio is a significant discovery, as it indicates imminent financial strain more so than the total

amount of debt.

Additionally, recent studies have shown that increased Eurobond exposure, currency rate risk,

and mismatch in debt-project execution are recurrent themes. The empirical research backs up

the idea that Nigeria's public debt has reached a critical level, beyond which it may impede
rather than aid economic development, notwithstanding differences in methodology, time

periods, and data sources..

2.8.3 Identified Research Gaps

Few studies integrate a study of external and domestic debt and their combined effects on

macroeconomic variables, despite the large body of knowledge.

The majority of empirical studies use data from before 2020, which ignores current fiscal

changes such as post-COVID borrowings, exchange rate liberalisation, CBN ways and means

advancements, and the debt restructure talks in 2023–2024.

Furthermore, a large number of current studies only consider growth, neglecting other crucial

factors like inflation, currency rates, and public investment. Additionally, multi-variable

modelling frameworks that provide dynamic feedback between debt and macroeconomic

performance are not often used..

2.8.4 Relevance of the Current Study

Given the aforementioned deficiencies, the new study is pertinent and topical in a number of

ways:

It aims to evaluate the effects of both foreign and domestic debt on Nigeria's economic

performance over a long time span in a comprehensive manner.

current data (covering 29 years, including the most current debt dynamics for 2024–2025) is

incorporated.
To ascertain both short-term and long-term correlations, the study uses reliable econometric

methods such co-integration tests and ordinary least squares (OLS).

In contrast to other studies, it also takes interest rate and inflation trends into account as

intervening factors in the debt-growth relationship.

In the conclusion, this study seeks to further the policy discussion over Nigeria's debt

sustainability by offering new data and practical suggestions for the nation's fiscal and

economic planning..
 CAPTER THREE

RESEARCH METHODOLOGY

3.1 Area of Study

This research evaluates the approved records of agencies and ministries of the Federal Republic

of Nigeria to analyze public debt management and institutional accountability.

3.2 Research Design

The techniques and steps for gathering the data required for the study are described in the

research design. It functions as the overarching foundation for operations. An annualised time-

series data technique encompassing a lengthy sample period is used in the study design. The

Ordinary Least Squares (OLS) approach was used to test for stationarity in order to guarantee the

dataset's integrity.

3.3 Population of the Study

The study focuses on Ministries, Departments, and Agencies (MDAs) collaborating with the

Debt Management Office (DMO). These include:

i. Federal1Ministry1of 1Finance (FMF)

ii. Budget1Office of1the1Federation1 (BOF)

iii. National1Planning1Commission1 (NPC)

iv. 1National Bureau1of Statistics1 (NBS)

v. Central1Bank of1Nigeria1 (CBN)

vi. Office1of the1Accountant-General of1the Federation1 (OAGF)

vii. Bureau1of Public1Enterprises1 (BPE)

viii. Infrastructure1Concession and1Regulatory Commission1 (ICRC)

ix. Securities1and Exchange1Commission1 (SEC)

3.4 Sources of Data

The1primary sources of data for this study include:

(i) Central1Bank of1Nigeria1Statistical Bulletins1and Annual1Reports

(ii) Statement1of Account of1the Debt1Management1Office

(iii) National1Bureau of1Statistics and related1publications

(iv) The estimation approach used in this study was the Ordinary Least Squares (OLS) method

supplemented with the dependent variable's lag values to account for first-order serial

correlation.

These changes give the methodology section a more comprehensive and understandable

summary of the data sources and research strategy used in the investigation of institutional

accountability and public debt management in Nigeria.

3.5 Sample size and sampling procedure

The population of the study was formed using the Consumer Price Index and prime lending rate

as control variables, GDP as the independent variable, and domestic and foreign debt stocks as

explanatory factors..
3.6 Measurement of variables

Secondary sources will be the source of the data used in this investigation. The publications of

the Central Bank of Nigeria (CBN), Debt Management Office (DMO), and National Bureau of

Statistics (NBS), such as the Statement of Accounts, CBN Annual Reports, and CBN Statistical

Bulletin, would be its main sources. The data was obtained using the following variables:

Prime Lending, External Debt Stock, and Domestic Debt Stock Consumer Price Index. Rate of

GDP (gross domestic product) from 2000 to 24.

Variables111 descriptions111 Source111 measurements111

RG Real1gross domestic1product

DP111 NBS111 NGN111

external1debt DMO/CBN111 NGN111

EXD111

DMD111 Domestic1debt DMO/CBN111 NGN111

CPI111 consumer1price1index Index Mundi111 percentage111

prime1leading1rate Index Mundi111 percentage111

LR111

3.7 Data analysis Technique

The period dossier up to age 29 will be arranged using the Co-unification technique of study,

which is an enhancement of the basic common smallest square approach (OLS). This strategy

was selected since it explains long-term business-related advancement.

The cointegration analysis is conducted using the estimating approaches listed below:

Test of the Unit Root: This is the pre-unification test. It's used to figure out how a changeable

is unified, or more precisely, how a repair suggestion is often supposed to be different to make a
mended better. It searches for behavioural indicators of a part that show whether the

modification has been implemented or whether a remedial suggestion has been offered. By the

worthless hypothesis, skilled is not a part root. This test uses the Improved Dickey More Filled

(ADF) method of belief. The rule stipulates that we admit the valueless theory, which holds that

the changing is fixed, if the ADF test event is more than the five allocation fault-finding

advantage; if the ADF test event is smaller, we veto the ineffective theory and proceed to

distinctness first. If the changeable does not enhance the initial distinctiveness, we become

twice as different. However, the initial dissimilarity must be addressed before the adjustable

enhancements may be implemented.

Co-integration: After the order of unification test is finished, the next step is to search for the

co-unification test. This test establishes if the variables in the model have a lasting link. This

will be accomplished using the Johansen approach.

Model for Vector Error Correction: The Heading Mistake Fixing Model (VECM) illustrates the

rate of adaptation from short-term to long-term evenness. It is believed that in order for

mistakes to be finally corrected, VECM cooperation must be negative and substantial. The

larger the VECM, the faster the adaptation rate.

The origin midway between two variables and two points is found using the Causality Test. Our

objective in this case is to identify and assess a new correlation between two points: extrinsic

mortgage and advancement connected to the business. The rule states that if the feasibility

advantage is between 0 and 0.05, a new friendship is created..

 CHAPTER FOUR
PRESENTATION AND ANALYSIS OF RESULTS
4.1. Data presentation
This table below incorporates the data covering the period 2000-2025 which form the basis
for the various analyses executed in this study.
Year Gross domestic Domestic debt External debt Total debt
product (GDP) (DOD) (EXD) (TB)
20001111 4,7619.701111 1,195.5011 2,331.2011 13,527.701111
20011111 49,063.301111 15,010.5011 8,819.4011 23,829.901111
20021111 53,107.401111 22,225.301111 10,577.7011 32,8021111
20031111 59,622.501111 25,675.01111 14,808.7011 40,483.71111
20041111 67,908.6011 27,952.01111 17,300.6011 45,252.601111
20051111 69,147.011 28,440.201111 41,452.4011 69,892.601111
20061111 10,522.9011 36,790.601111 100,789.1011 137,579.701111
20071111 139,085.311 47,031.101111 133,956.3011 180,987.401111
20081111 216,787.5011 47,051.101111 240,393.7011 287,444.801111
20091111 267,550.0011 84,093.101111 298,614.4011 382,707.501111
20101111 312,139.8011 116,200.101111 328,453.8011 444,653.901111
20111111 532,613.8011 161,900.201111 544,264.1011 706,164.301111
20121111 683,869.8011 261,093.6011 633,144.4011 894,238.901111
20131111 899,863.2011 359,360.901111 648,813.011v 908,173.901111
20141111 1,933,211.6011 248,774.51111 716,865.6011 965,640.101111
20151111 2,702,719.1011 343,674,101111 617,320.011 960,994.101111
20161111 2,810,972.6011 359,029.201111 595,931.9011 954,961.101111
20171111 2,708,430.9011 537,490.901111 633,017.001111 1,170,507.9011
20181111 3,194,023.6011 794,259.901111 2,577,374.4011 2,372,180.8011
20191111 4,537,640.0011 898,253.901111 3,097,383.9011 3,995,637.8011
20201111 4,685,912.2111 1,016,976.0011 3,176,291.0011 4,193,267.0011
20211111 5,403,006.811 1,666,000.7011 3,932,884.8011 5,098,885.5011
20221111 6,947,819.911 1,329,680.0011 4,478,329.3011 5,808,009.3011
20231111 11,411,066.901 1,370,325.1011 4,890,269.2011 6,260,594.7011
20241111 14,610,881.511 1,525,906.6011 2,695,072.2011 4,220,978.8011
20251111 18,222,790.001 1,753,259.0011 451,461.701111 2,204,720.7011
111
Source:Central Bank Of Nigeria, Statistical Bulletin Various Issues.
Unit Root Test
The Augmented Dickey Fuller (ADF) unit root test was applied and the result shown in the
table 1 below.
Table 1 Summary of ADF Unit root test
Variables11 ADF Test critical value Probability1111 order of
Statistic1111 At 5%1111 integration

RGDP11 -4.9911 -3.581111 0.00221111 1(I) 1111

EXD11 -3.2511 -3.581111 0.09581111 1(I) 1111

DMD11 -2.8911 -3.581111 0.17931111 1(I) 1111

CPI11 -3.0211 -3.581111 0.10491111 1(I) 1111

LR11 -8.2611 -3.641111 0.00001111 1(I) 1111

Source: Author’s computation

Johansen co-integration Test: The co-integration result is given below:
Source: Author’s computation
Vector Error Correction Estimate
The result of VECM is provided in table 3 below.
Table 1: Vector Error Correction Estimates

Dependent Variable: RGDP

Variables 11 Coefficient1111 Standard Error T-Statistics Probability1111

C11 -995.1871111 4423.0491111 -0.215961111 0.83081111

EXD11 -0.478561111 0.6301281111 -0.759471111 0.4551111

DMD1111 13.82471111 1.3619891111 10.150371111 01111

CPI1111 -93.15361111 78.028511111 -1.193841111 0.24421111

LR1111 -37.84281111 213.00611111 -0.177661111 0.86051111

ECM(1) 1111 -0.0207671111 0.093011111 -0.223271111 ________

R-Squared=0.985337. 11 Adjusted1R-Square=0.982894
F-Statistic1=403.201611 Prob(F-Statistic)=0.000000111111111
Durbin1Watson=1.283428

Source: Author’s computation

Granger Casualty Test

The result of pairwise granger casualty between the variables under this study is provided in
Table 3 below.
Table3: Pairwise Granger Casualty Test
Null Hypothesis Observation F-statistic11 Probability1
RGDP1does not1granger cause1DMD 271111 0.092721111 0.91181111
DMD1does not1granger cause1RGDP 4.706291111 0.01991111
RGDP1does not1granger cause1EXD 271111 0.021271111 0.97901111
EXD1does not1granger cause1RGDP 0.030551111 0.97001111
RGDP1does not1granger cause1CPI 271111 1.366161111 0.27591111
CPI1does not1granger cause1RGDP 1.843971111 0.18181111
RGDP1does not1granger cause1LR 271111 1.843801111 0.18181111
LR1does not1granger cause1RGDP 0.274331111 0.76261111
DMD1does not1granger cause1CPI 271111 0.941861111 0.61081111
CPI1does not1granger cause1DMD 4.353571111 0.02551111
EXD1does not1granger cause1CPI 271111 0.504221111 0.61081111
CPI1does not granger cause1EXD 0.201461111 0.81901111
LR1does not1granger cause1DMD 271111 0.486951111 0.62101111
DMD1does not1granger cause1LR 1.770481111 0.19371111
LR1does not1granger cause1EXD 271111 0.170061111 0.84471111
EXD1does not1granger cause1LR 0.514261111 0.60501111
Source: Author’s computation
4.2 Discussion of results

The characteristics instantaneous succession variables are determined by a preceding reasoning

search for the position of a part root in the order. Our lack of knowledge about the dossier

generation process is mostly to blame for this. The results of the part root test showed that none

of the variables were set at levels. However, GDP, DMD, EXD, LR, and current retail prices

were all established at first distinctness. This is further confirmed by one depressed odds

principle and is backed by every depressed ADF test occurrence. Since the variables were not

specified at level succession, a co-unification test is utilised to ascertain whether the continuous

mergers of the theory of probability styles in the sequence are co-joined. The findings of both

the Trace enumerations and the Top-Eigen co-unification rank test are displayed in Table 2. The

trace enumerations given in the first part describe co-mixing at the 5% level of meaning.

Furthermore, the Maximum Eigen test in the second part indicates that co-mixing is equivalent at

the 5% significance level. As a result, the variables in the model have a strong, long-term link.

The incorrect fixing model (ECM) indicates that the rate of adaptation from short-term to long-

term evenness is negative but statistically insignificant, supporting the earlier premise that it

must be negative. The Durbin-Watson profit (1.283428) falls in the fault-finding domain,

indicating that sequential equivalence is not supported by the alleged model.

Nigeria's business-related developments and the new friendship money the country owes are the

main topics of this research. The valueless theory states that EXD and DMD do not cause

Ranch Owner, and RGDP does not produce EDS and DDS. The criterion stipulates that the

anticipation of the f-detail of action must be smaller than 0.5 in order to indicate new friendship

at the 5% level. Our new variables, RGDP and DMD, have respective probabilities of 0.0199

and 0.9118. We therefore reject the inadequate explanation and come to the conclusion that skill
in Nigeria is a new relationship between gross household brand per person and household

responsibility. However, the likelihood of our new variables, RGDP and EXD, is 0.9700 and

0.9790, respectively. We find that there is no new association between extrinsic bills and

Nigeria's gross domestic output per capita after admitting the theory's inefficiency. The best-

quality friendships in Nigeria are thought to last between the burden of household credit and the

gross household device per person, rather than between the load of extrinsic loans and the gross

household crop per person..

4.3. Comparison of Results with Previous Findings

According to the study's conclusions, in the above practical scenario, harm becomes a burden

when it is not properly taught. The results of the many studies that were examined, along with

the irregularities of a few of the bills that were taken into consideration, have led to a wide range

of conclusions. According to the study's findings, sensible obligation management

acknowledges the possibility of preventing the cramming-out effect of household bills due to the

fact that, when it meets expectations and exceeds actual gross household merchandise, household

arrears return more than outside deficits. However, cautious concern acknowledges the

possibility of taking to outside arrears despite their ability to have a longer abundant capacity of

funds for creative property.

Attending a culturalized version of Unit Five that incorporates your points along with further

guidance and issues:

 CHAPTER FIVE

SUMMARY, CONCLUSION, AND RECOMMENDATIONS

5.1 Summary of Findings

Extrinsic credit stock, home bill stock, current retail prices, prime sum charged for money usage,

and gross household gadget per person in Nigeria are the two points from which the study

reveals a long-term friendship middle. In particular, domestic duty stock (DMD) demonstrates a

positive and very significant relationship with RGDP, but extrinsic harm stock (EXD) shows an

insignificant negative relationship with RGDP..

5.2 Conclusion

This study looked at how external harm affected Nigeria's business development, with the goal

of identifying new and significant long-term relationships between the country's debt and

business-related issues. While extrinsic deficit stock, household indebtedness stock, current

retail prices, and prime sum paid for usage of money were free variables, the original gross

household gadget masquerading as a financial growth agent (helpless changeable) was not.

Although the rulings suggest that external debt has not significantly contributed to Nigeria's

business-related crisis, domestic credit plays a more significant role. However, prudence is

advised since household arrears aggregate grant authorisation results in inflation and higher

lodging costs, potentially crowding out private funding..

5.3 Recommendations

1. rules for Public Loans: The Nigeria Debt Management Office should create strong rules for

public loans that include the goals, deadlines, requirements for a moratorium, negotiating costs,

and terms for accepting and guaranteeing loans, especially those from outside sources.

2. Debt Utilisation: To avoid theft, funds from foreign debt should be allocated to high-return

initiatives that maintain accountability and transparency throughout project execution.

3. Economic Policies: To boost economic activity and productivity, economic policies should

emphasise import substitution and export promotion. This will strengthen external reserves,

create a more favourable balance of payments, and boost foreign exchange profits.

4. Reducing foreign Debt: The government should make lowering the amount of foreign debt

buildup a top priority over time, considering the little contribution of external debt to Nigeria's

GDP.

5. Promotion of Domestic Debt: Since domestic debt encourages financial depth and makes a

substantial contribution to the growth of the country, it ought to be pursued. However, in order

to prevent inflation and rising loan rates from discouraging private investment, care is required.

6. Debt Management Oversight: To minimise debt overhang, authorities in charge of overseeing

Nigeria's public debt should closely monitor debt payment obligations and stop debt from

accruing over a certain threshold.

7. Taxation and income Diversification: To boost local investment, diversify income streams,

and lessen dependency on borrowing to fund the budget, the Nigerian government should think

about raising the tax-to-GDP ratio and encouraging import substitution techniques..
5.4 Limitations of the Study

Nigeria faces major issues because of its low capital and reliance on foreign loans to supplement

local savings, balance payment imbalances, and handle income deficiencies. The worrisome rate

at which the debt stock is continuously increasing emphasises how urgent it is to solve these

fundamental problems.

While admitting the study's limitations, this updated chapter summarises the study's results,

conclusions, and suggestions, offering practical advice to improve public debt management and

promote economic growth in Nigeria..