National Debt and Economic Growth in Nigeria: An Empirical Review of Debt Servicing

Abstract

This study undertook an empirical review of the relationship between national debt and economic growth in Nigeria. The scope spanned from 2000 to 2024 with specific emphasis on the dynamics of real GDP, foreign debt, foreign debt servicing, domestic debt, domestic debt servicing and exchange rate. Using an empirical review approach, this research synthesizes findings from recent studies and evaluates national debt as a critical channel through which economic growth and development could be influenced. The study employs secondary data from the Central Bank of Nigeria, Debt Management Office, World Bank and other relevant sources and applies econometric methods such as the regression, descriptive statistics and averages. The findings suggest a mixed relationship: while moderate debt, when efficiently utilized, can stimulate economic growth by financing infrastructure and social investment, excessive debt servicing obligations crowd out resources from productive sectors, thereby undermining growth. Evidence further shows that external debt servicing exerts a more significant drag on growth compared to domestic debt servicing, due to foreign exchange outflows and exchange rate pressures. The researchers concluded from the findings of this study that, Nigeria’s debt growth nexus is highly sensitive to debt management strategies and fiscal discipline. It was recommended from the findings of this study that government should strengthen debt sustainability frameworks, prioritize concessional borrowing, enhance revenue generation, and channel borrowed funds into high-impact, growth-inducing projects. By doing so, Nigeria can mitigate the adverse effects of rising debt servicing while harnessing the growth-stimulating potential of public borrowing.