ABSTRACT
This project work investigates the critical issue of Nigeria's increasing public debt and its potential impact on the country's financial stability and economic growth. The research emphasizes the significance of the debt service to revenue ratio as a crucial indicator of Nigeria's ability to meet its financial obligations. The study highlights that despite the seemingly low debt-to-GDP ratio, the country's rising debt service costs are causing concerns about its solvency.
The research underscores the relationship between public debt, public revenue, and economic growth, utilizing an econometric model within the Recursive Dependency Theory framework. The study employs logarithmic transformations for data analysis, aiming to enhance data interpretation and reduce the influence of outliers.
Furthermore, the study points out that Nigeria's debt service costs have escalated significantly, especially since the 2016 recession, largely due to dwindling revenues, notably from the oil sector. The project reveals alarming trends in the debt service to revenue ratio, with projections suggesting that an increasing proportion of the government's income is allocated to servicing debt, potentially posing risks to fiscal sustainability.
In summary, this research project sheds light on the complexities of Nigeria's public debt situation, emphasizing the importance of the debt service to revenue ratio as a critical indicator of debt sustainability. It underscores the need for a comprehensive assessment of the country's fiscal policies and revenue-generation capabilities to address growing concerns about financial stability and economic growth.
