Macroeconomic determinants of Nigeria’s domestic debt
Abstract
Motivated by the rising debt profile of Nigeria and the reported economic quagmire the nation is facing, this study empirically investigates the macroeconomic determinant of Nigeria’s domestic debt between 1985 to 2021.Population, inflation, government expenditure and gross domestic product constitutes the independent variables, whereas aggregate domestic debt formed the dependent variable. However, these were proxied with their growth rates. It utilized logged variant of secondary data obtained from Central Bank of Nigeria (CBN) Statistical Bulletin and Nigeria Bureau of Statistics (NBS). The studyis based on Keynes general theory and Malthus population theory. E-views 12 was employed for data analysis. Initially, graphical trend of data was used to analyze the data. At first stationarity test was done and the data were stationary at order 1 (first difference) thereby necessitating the Johansen cointegration test from which a long-term relationship was obtained. However, full rank was observed which gave rise to the conversion of the study data to its natural logged form and the beginning of the process all over.In furtherance, stationarity test was engaged in at order zero (levels) and the data were stationary. Hence, ordinary least squares (OLS) test was employed as a tool for analytical purpose.Our OLS test revealed the following: (i) positive and significant relationship between population growth rate (PGR) and aggregate domestic debt growth rate (ADDGR), (ii) negative and significant relationship between inflation rate and aggregate domestic debt growth rate (ADDGR) in Nigeria, (iii) positive and insignificant relationship for both government expenditure growth rate (GEGR), gross domestic product growth rate (GDPGR) and Nigeria’s aggregate domestic debt growth rate (ADDGR). The OLS test further showed that 68.72% variation in the study’s dependent variable (aggregate domestic debt) was determined by the choice macroeconomic determinants of the study (i.e. population, inflation, government expenditure and gross domestic product).Causality test was conducted and the result obtained tells that non among the choice determinants promoted Nigeria’s aggregate domestic debt, instead aggregate domestic debt promoted inflation. Based on our findings we recommended the following; (i) Nigeria’s government should encourage population control, (ii) inflation should be targeted the government’s monetary policy,(iii) government should reduce its expenditure by ensuring that prudence is exercised in its spending pattern so as to reduce its domestic debt, (iv) further related research should be engaged in while incorporating those macroeconomic variables that were not captured on this study.
Downloads
References
Adaramola, A.O. & Dada, O. (2020). Impact of inflation on economic growth: evidence from Nigeria. Investment Management and Financial Innovations,17(2),1-13.
Ademuyiwa, J.A. & Adetunji, A.A. (2019). Impact of some economic variables on the real gross domestic product of Nigeria. Budapest International Research and Critics Institute-Journal (BIRCI-Journal) 2(4),12-19.
Akinsulire, O. (2014). Financial management (8th ed.). ISBN:978-3 8434-0-0. Retrieved 21/10/2016.
Alison, J. (2003). Key issues for analyzing domestic debt sustainability. Debt Relief International Publication, ISBN: 1-903971-07-1.
Asaolu T.A., Akinadawo, I.S. &Oyedoku G.E. (2020). Domestic debt management and government revenue in Nigeria.
Bahr, C.,Shan, L.H., and Lam, A. (2020). The macroeconomic effects of public debt: An empirical analysis of evidence from Canada. Journal of Accounting, Business and Finance Research. ISSN: 2521-3830 10(1) pp. 1-9, 2020.
Bandiera, L. (2008). Public debt and its determinants in low-income countries. Results from 7 country case studies. Washington: World Bank.
Baridam, D. M. (2001). Research methods in administrative sciences, (2) Port Harcourt; paragraphics.
Belguith, S. &Omrane, H. (2017). Macroeconomic determinants of public debt growth: A case study for Tunisia. Theoretical & Applied Economics,24(4), 161-168.
Beyene, S.D. &Kotosz, B. (2020). Macroeconomic determinants of external indebtedness of Ethiopia: ARDL approach to cointegration. Society and Economy 42 (2020) 3, 313–332.
Burhanudin, M.D., Muda, R., Nathan, S.B., & Arshad, R. (2017). Real effects of government debt on sustainable economic growth in Malaysia. Journal of International Studies, 10(3), 161-172.
Central Bank of Nigeria Statistical Bulletin (2019).
Central Bank of Nigeria Statistical Bulletin (2021).
Engle, R.F. & Granger, C. W. (1987). Co-integration and error correction: representation, estimation and testing. Econometrica: Journal of Econometric Society, 251-276.
Ezirim, B. C. (2005). Finance dynamics: principles, applications and techniques. Markowitz centre for research and development. Port Harcourt.
Ezu, G.K (2012) Electronic banking system in Nigeria. Arabian journal of Management, 3(5), 12-24.
Gujarati, D., & Porter, D. (2009). Basic econometrics (5th ed.). McGraw-Hill/Irwin.
Hameed, M.R., Batool, H. and Hussain, I. (2020). Dynamics of domestic debt and its implication on economic growth: Evidence from SAARC countries. Journal of Peace, Development and Communication, 4(30) 2020, pp. 428–444.
Jhingan M.L. (2004). Macroeconomic theory New Delhi: Vrinda Publication United.
Johnny, N. &Johnnywalker, W. (2018). The Relationship between external reserves and economic growth in Nigeria (1980-2016). International Journal of Economics, Commerce and Management, 6(50), 213–241.
Keynes, J.M. (1936). The general theory of employment, interest and money. London: the Macmillan press LTD.
Kothari, C.R. & Garg, G. (2020). Research methodology: Methods and techniques, 4th edition. New age international publishers.
Madow, N., Nimonka, B., Brigitte, K. & Camarero, M. (2021). On the robust drivers of public debt in Africa: Fresh evidence from Bayesian model averaging approach. Cogent Economics & Finance, 9(1).
Meedee, P. (2014). Domestic debt and economic growth in Nigeria. Nigerian Journal of Finance Research. 9(1), 2014.
Mulugeta, E.T. (2021). Macroeconomic determinants of external debt accumulation in Ethiopia: An ARDL Bound Testing Approach. African Journal of Economics and Sustainable Development, 4(2), 1-28.
Nnamdi, I.S. &Omojefe, G.O. (2009). A prediction model for Nigeria’s public (external) debt: A revisit. Journal of Finance, Banking and Investment, 3(1).
Nwinee, B.F. &Torbira, L.L. (2012). Public financial management in Nigeria. Port Harcourt: University of Port Harcourt Press.
Odozi, V.A. (1996). Nigeria’s domestic debt stock. An assessment of central bank of Nigeria (CBN) debt trend. 20(2).
Ogunbiyi, S.S. &Okunlola, F.A. (2015): Domestic debt and real sector growth: A VAR Approach. International Journal on Banking and Finance Research 5,2015.
Oji, G.U. & Christian, E.J. (2021). Domestic debt effect on Nigeria’s economic growth. GPH-International Journal of Business Management, 5(03), 01-15.
Okereke, E.J., Sanni, T.A., Anyanwu, T.I. & Ogunbiyi, S.S. (2009). Money and the Nigerian financial system. Published by Jeso International Owerri, Imo State, Nigeria. ISBN: 978-37139-8-1.
Okonjo-Iweala, N. (2011): Frets over rising domestic liabilities. The nation newspaper, August 2P1 ,2011.
Oliinyk, V. &Kozmenko, S. (2019). Forecasting and management of gross domestic product. Journal of International Studies, 12(4).
Olowe, R. (2009). Modelling naira/dollar exchange rate volatility: Application of Garch and asymmetric models. International Review of Business Research Papers, 5(3), 376- 397.
Omodero, C. O., Adetula, D.T., Adeyemo, K. & Owolabi, F. (2020). Domestic debt and economic growth sustainability: Assessment of the scenario in Nigeria. Academy of Entrepreneurship Journal. 26(2) 2020.
Oshadami, O.L. (2006). The impact of domestic debt on Nigeria’s economic growth. BSC project page 20, department of economics, Kogi state university, Ayigha.
Ouma, W. N., &Muriu, P. (2014). The impact of macroeconomic variables on stock market returns in Kenya. International Journal of Business and Commerce, 3(11), 1-31.
Pjanic, M., Milenkovic, N., Andrasic, J. Kalas, B. &Mirovic, V. (2020). Public debt’s predictors in EU: Evidence from members and non-members of European monetary union. Economic Research-Ekonomska,Istrazivanja. ISSN: (Print).
Reddy, T. K. (2020). The general government capital spending and its effect on Gross Domestic Product: Evidence from India. Journal of critical reviews, 7(19), 4164-4174.
Sadik-Zada, E. R. & Gatto, A. (2019). Determinants of the public debt and the role of the natural resources: A cross-country analysis.
Semik, S. & Zimmermann, L. (2021). Determinants of substantial public debt reductions in Central and Eastern European Countries. Empirica, 1-18.
Sinha, P., Arora, V. & Bansal, V. (2011). Determinants of Public Debt for middle income and high income group countries using Panel Data regression. Munich Personal Repec Archive (MPRA Paper).
Swamy, V. (2015). Government debt and its macroeconomic determinants: An empirical investigation. MPRA Paper, 64106.
Thuan, V. D. (2018). Determinants of public debt in lower-middle income countries. VNU Journal of Science: Policy and Management Studies, 34(3).
Tuff, T. & Tarsi, K. (2012) Introduction to population demographics. Nature education Knowledge 3(11):3.
Wani, S. R. (2019). Research methodology. Edu/research methodology/sampling. Population and sample.
The authors and co-authors warrant that the article is their original work, does not infringe any copyright, and has not been published elsewhere. By submitting the article to GPH-International Journal of Business Management, the authors agree that the journal has the right to retract or remove the article in case of proven ethical misconduct.
