ABSTRACT

Thestudy was undertaken to evaluate the impacts of government borrowings on economic growth in Nigeria using annual time series data spanning 1981 to 2022. The study analyses the roles of domestic borrowing, external borrowing and debt service payment to economic growth.  To ascertain the long and short term relationship between government borrowings and economic growth, the Autoregression Distributed Lag estimate was adopted to estimate the long and short term relationship between government borrowings and economic growth. The study finds that external debt in the short-run does not determine economic growth but it impacts long run growth. Domestic debt on the other hand, impacts economic growth both in short-run and long-run. Debt service payment in turn, retards economic growth in both long-run and short-run. The study concludes that increase in domestic debt and foreign debt necessitate increase in debt service which negatively affect economic growth in Nigeria. It also concludes that the rate of growth in output is affected by debt accumulation. The study recommends that Government in Nigeria makes pragmatic effort to increase domestic revenue generation and also execute fiscal transformations that reduce public debt and deficit financing to a sustainable level.  Also, government should ensure that borrowed funds are effectively utilized in key sectors of the economy that is capable of generating revenue to support growth of other sectors of the economy.

The study recommends that projects to be financed with government borrowing should be properly appraised and their technical feasibility, financial viability and economic desirability ascertained before the funds are committed. This would help to restore financial discipline and curtail the misapplication and inefficient management of public debts.

Since domestic debt stimulate higher rate of economic growth in Nigeria, that is repayment of the principal and interest on such domestic debt is a reinvestment into the economy which usually have a multiplier effect on domestic investment in the economy, domestic debt should be seen as a veritable tool of economic growth.