Public Debt Financing Strategies and Their Impact on Sustainable Economic Growth in Nigeria

Abstract

This study examines the impact of public debt financing strategies on sustainable economic growth in Nigeria between 1990 and 2024. The research employs secondary time-series data obtained from the World Bank, Debt Management Office, and Central Bank of Nigeria, analyzing the relationships between public debt indicators and economic performance. Using an econometric regression model, the study investigates how debt-to-GDP ratio, interest paymentsto-revenue, gross fixed capital formation, inflation, real interest rate, and exchange rate influence real GDP growth. The results reveal that debt-to-GDP ratio, interest payment burden, inflation, and exchange rate volatility exert a negative and significant impact on growth, consistent with the debt overhang and crowding-out hypotheses. real interest rates positively influence growth, highlighting the importance of channeling borrowed funds into productive investments. Diagnostic tests confirm the model’s reliability, absence of serial correlation and heteroskedasticity, and structural stability over the study period. The findings suggest that Nigeria’s public debt can support sustainable growth only if strategically managed and directed toward productive capital projects. The study recommends strengthening debt management frameworks, diversifying revenue sources, reducing reliance on external borrowing, and prioritizing infrastructure and investment-led growth. These policy measures are essential to ensure that debt financing contributes to long-term economic sustainability.