Effect of Public Debt on Economic Development in Nigeria (1986-2024)

Abstract

This study examined the effect of public debt on economic development in Nigeria over the period 1986–2024. Specifically, the study analyzed the influence of public debt on the Human Development Index (HDI), poverty level, Gross Domestic Product (GDP) per capita, and unemployment. The study was anchored on the Keynesian Theory of Public Debt and the Debt Overhang Theory. An ex-post facto research design was adopted, while annual secondary data were obtained from the Central Bank of Nigeria Statistical Bulletin and the World Bank Development Indicators. The Autoregressive Distributed Lag (ARDL) estimation technique was employed to examine the study because of its suitability for time-series data with mixed orders of integration. The empirical findings revealed that public debt exerts a positive but insignificant effect on the Human Development Index. public debt was found to have a positive but statistically insignificant effect on poverty. Furthermore, the results showed that public debt has a positive but statistically insignificant effect on GDP per capita. Likewise, public debt exhibited a positive but statistically insignificant effect on unemployment, indicating that debt accumulation has not significantly influenced employment generation. Overall, the study concludes that public debt has not significantly enhanced economic development in Nigeria. The study recommends that borrowed funds should be directed towards productive and labour-intensive sectors, while strengthening transparency, accountability, and project monitoring to ensure that public borrowing translates into sustainable economic development.