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

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.