Effect of Public Debt on Public Investment in Nigeria: 1985-2018
Chukwu, Kenechukwu Origin *
Department of Banking and Finance, Nnamdi Azikiwe University, Awka, Anambra State, Nigeria. 5025, Awka, Nigeria.
Ogbonnaya-Udo, Nneka
Department of Banking and Finance, Nnamdi Azikiwe University, Awka, Anambra State, Nigeria. 5025, Awka, Nigeria.
Chimarume Blessing Ubah
Department of Banking and Finance, Nnamdi Azikiwe University, Awka, Anambra State, Nigeria. 5025, Awka, Nigeria.
*Author to whom correspondence should be addressed.
Abstract
This study examined the effect of Nigeria public debt on public investment from 1985-2018. Data for the analysis was obtained from Central Bank of Nigeria Statistical bulletin and the study chooses Nigeria as its sample. ARDL Auto-regressive Distributed lag models was used to test the effect of the independent variables (Public Debt, Budget Deficit, Debt Servicing, Public Debt to GDP Ratio) on the dependent variable (Public Investment). The cointegration test found the existence of long-run relationship among the investigated variables. The short run result shows that public debt has insignificant effect on public investment in Nigeria. The study therefore recommends among others that Federal government should be fiscal responsible by channeling borrowed funds to investments that will bring growth in the economy. Government should tackle waste and corruption by making sure that funds borrowed and allocated for investment should be transparently and judiciously utilized in the provision of infrastructure. Debts should be taken only when necessary and should be for investment and not for payment of salaries.
Keywords: OLS regression, public investment, public debt, economic development.