Sovereign Debt and Economic Development: Evidence from Nigeria
Abstract
Sovereign debt is a critical fiscal policy instrument used by government to achieve its set macroeconomic objective making it a critical subject in economics and finance and hence our motivationfor the need to examined the impact of sovereign debt on economic development of Nigeria. Sovereign debt was broken into external debt, domestic debt and debt services while economic development was proxied by per capita income. Annual time series data from 1990 to 2021 obtained from Central Bank of Nigeria statistical bulletin was used for analysis while statistical method of analysis employed include the ARDL and its associated bond test which was motivated by the fractional order of integrated observed in the Philip Perron Unit root test and the granger causality test. Results showed absence of long run equilibrium relationship between sovereign debt and economic development and that in the short run, all the debt component studied showed insignificant negative association with per capital income. The causality test showed presence of a unidirectional causality flowing from per capita income to external debt and debt services while a bidirectional causality was recorded between domestic debt and per capita income. The study recommends the need for sovereign borrowing to be channeled into economic activities that have the capability of generating further income and further improve the lives of citizens.
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