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Journal of Emerging Markets and Management

Public Debt, Fiscal Policy and Economic Growth in Nigeria

DOI:

https://doi.org/10.63385/jemm.v2i3.101122

Keywords:

Fiscal Policy,Public Debt,Economic Growth,Inflation,Nigeria

Abstract

This paper examined the impact of public debt and fiscal policy on Nigeria’s economic growth using the Autoregressive Distributed Lag (ARDL) model. The annual time-series data from 1981 to 2023 were obtained from the Central Bank of Nigeria Statistical Bulletin and the World Bank archives. The study analyzed the long-run and short-run interactions between the real GDP and the variables of domestic and public debt. The findings revealed that external debt exhibits a negative long-run and positive short-run implication effect on economic growth. Debt servicing was positive in the long run and negative in the short run. Public debt is a unique determinant of economic instability as it comes with its inflationary effects. The long-run estimates give fiscal balances, with costs of high debt servicing, which encourage a favorable public investment, as it favors economic development in the long run. The error correction mechanism confirms a stable adjustment process towards long-run equilibrium; the research still maintains its stance on fiscal discipline, efficient debt management, and strategic capital investment to enhance macroeconomic stability in Nigeria. The recommendations are that the government should put in some tax mechanisms that will make them pay off the debt. Industries should source their raw materials locally rather than importing them in order to generate more revenue for themselves and the government. The authorities should also find ways of attracting foreign investors to invest in our economy, which will create jobs for our youths. Facilities for farmers should be subsidized by the government to promote agricultural productivity. This will go a long way in generating revenue for the government and reducing the foreign debt.

References


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    Copyright (c) Copyright © 2026 Hezekiah Amamizo Ogunnubi

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