INTERNATIONAL JOURNAL OF ACCOUNTING, FINANCE AND TAXATION

DEBT SERVICING AND ECONOMIC GROWTH IN NIGERIA

Ogboru-Michael, Titi, Ebele Patricia Ifionu
April 7, 2026

Abstract

Rising level of public debt and surged debt servicing obligations have become major problems for economic stability and growth in Nigeria. A large proportion of revenue by governments is often spent on debt repayment and there is concern as to the effect of debt servicing on growth. This study investigated the relationship between debt servicing and economic growth in Nigeria where the proxies for debt servicing were domestic debt servicing (DDS) and foreign debt servicing (FDS), while the indicator of economic growth was the gross domestic product (GDP). The research was based on the debt overhang theory, Keynesian theory of public debt, and the Solow growth theory. The research design used in this study is ex-post facto research design and the philosophy of research used is positivism. Secondary time series data spanning the time-period 1986 to 2024 were obtained from the Central Bank of Nigeria Statistical Bulletin and World Bank Developments Indicators. The population of the study were Nigeria's macroeconomic data in the study period and the sample size were 39 annual data selected with the help of census sampling technique. Data were analysed by adopting methods of descriptive statistics, Augmented Dickey-Fuller Unit Root Test, cointegration test of Johansen and ECMs were parsimonious error correction model (ECM) at 5% level of significance. The results showed that domestic debt servicing is negatively and significantly impacting GDP, whereas the foreign debt servicing has a positive and significant impact on economic growth in Nigeria. The study therefore concludes that excessive domestic debt servicing is growth inhibiting whereas productive use of foreign borrowing may be growth fostering. The study recommends prudent debt management at the domestic level, productive use of external debt and enhanced fiscal transparency. The research contributes to the knowledge by highlighting the empirical evidence regarding differential impacts of domestic and foreign debt servicing on economic growth in Nigeria.

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INTERNATIONAL JOURNAL OF ACCOUNTING, FINANCE AND TAXATION

Published in INTERNATIONAL JOURNAL OF ACCOUNTING, FINANCE AND TAXATION

ISSN: 3027-0378

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