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Impact of National Debt and Cost of Governance on Nigeria’s GDP: 1999– 2021

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  • November 7, 2022
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ABSTRACT

This study examined the impact of Nigeria’s huge national debt and the cost of governance on her GDP using some macroeconomic indices as proxies for the period 1999 – 2021. The specific objectives are to investigate the impact of debt servicing costs on GDP in Nigeria for the period, 1999 – 2021and to examine the impact of cost of governance on GDP in Nigeria within the same period. In this study, we reviewed the theoretical and empirical literature in order to understand all the issues, challenges and consequences of maintaining such huge national debt portfolio in the face of our burgeoning cost of governance on our deteriorating GDP since the commencement of this democratic dispensation in 1999. We used ex-post facto type of research design to gather all the relevant data from the Debt Management Office(DMO), National Bureau of Statistics (NBS) and Central Bank of Nigeria (CBN) websites and adopted the ADF econometric model to address the unit root issues associated with time series econometric data gathering and then deployed the dynamic ARDL regression model to regress the dependent variable (Gross Domestic Product (GDP)), on the two independent variables (debt servicing costs (DSC) and cost of governance (COG)) which were used as proxies for measuring their impact on the GDP of Nigeria. Furthermore, we used the Ramsey regression error specification model to determine whether there is a functional form misspecification in the ARDL model used and found that the model was correctly specified. From our study, we found that while debt servicing costs had a negative and less significance impact on the GDP, cost of governance had a positive and significant impact on the GDP over the period of study. Based on this finding, we recommended several governance costs cutting measures, among other alternative debt financing options and suggested appropriate remediation policies for government to tackle this monstrous twin evil of a burgeoning debt servicing cost and cost of governance in Nigeria.

Keywords: National Debt; Debt Servicing Cost; Cost of Governance; Corruption

Authorship: Osam, M. PhD, Okolie, P. I. P. PhD and Ezeamama, M. C. PhD | FULL PDF

 

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