Impact of Government Debt on Nigeria's Economy Growth

Abstract

Government debt and it's importance to revenue generation have generated a lot of debate over the years in Nigeria, particularly with respect to economic growth. This paper examines the effect of government debt on economic growth in Nigeria between 1986 and  2022. The study reveals that the impact of government debt on economic growth over the period under review is significant- with external debt, which has been enormous over the years, contributing minimally to real gross domestic product.  The study makes use of a multiple regression model to check the relationship that exists between government debt and Nigeria's economy growth. The findings of the study reveal that if the cause of consistent borrowing is not curbed, the economy will slump further, resorting to surplus budgeting and igniting increases in unemployment, decreases in total investment, falling reserves, increased exchange rate high inflation and consequently increased poverty. Borrowing is thus recommended as a last resort by the government to revitalize the economy, and if necessary, the loans should be sourced within the economy so that when the principal and interest on the loans are paid back, it will serve as a crowd-in-effect, which in turn accelerates economic activities in the country. Also, other alternative sources of government revenue, especially taxation hitherto neglected, should be explored to minimize dependence on borrowed funds to revamp the economy. Finally, power should be made steady so that the costs of sectors that rely on alternative energy sources to thrive can be decreased; thus, such monies can be utilized for remunerative alternative employment.