Public Debt and Economic Growth in Nigeria: Investigating the Optimal Threshold Level

Nzeh, Innocent Chile

doi:10.18488/journal.107.2020.82.112.127

Cited by 3 publications

(3 citation statements)

References 12 publications

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“…As these rates are highly reliant on the level of investment, these new taxes would likely create distortions in investment. The immediate consequence is that the expected return from productive investments will be insignificant for economic sustainability, to the extent that spending on debt service will weaken foreign and domestic investments (Ndoricimpa, 2020).…”

Section: Literature Review Theoretical Exposition: Over Indebtednessmentioning

confidence: 99%

“…a) The first group investigated the threshold effects of public debt sustainability on investments (Omotor, 2021;Ramu, 2021;Pokou, 2020;Akinlo, 2021;Ndoricimpa, 2020;Fasoranti et al, 2019;Khanfir, 2019;Knapkova et al, 2019;Belguith & Omrane, 2019;Goedl & Zwick, 2018;Beqiraj et al, 2018;Culling, 2017;Omotosho et al, 2016;Pescatori et al, 2014;Baum et al, 2012).…”

Section: Macroeconomic Swings Inmentioning

confidence: 99%

“…Non-methodological reasons for the lack of a common consensus are variations in the macroeconomic policies of various countries. Ndoricimpa (2020) showed that no single threshold applies to all countries. Thilanka & Ranjith (2018) demonstrated that the threshold effect of public debt varies among countries.…”

Section: Macroeconomic Swings Inmentioning

confidence: 99%

See 2 more Smart Citations

Government Debt Sustainability and Investments in Nigeria: Trends and Risk Thresholds amidst Macroeconomic Swings

Onyele

Ikwuagwu

Opara

2023

PJGD

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The core idea behind government debt is to fund fiscal deficit, which is anticipated to drive economic investments. To a larger extent, this is not the case, as evidenced in the Nigerian context, where debt has risen so high with investment levels declining, thus questioning the government's ability to manage and sustain its debt to pursue vital investment needs. This study aimed to investigate the threshold effect of debt sustainability on investments amidst macroeconomic swings from 1981 to 2020. In this regard, the threshold autoregressive regression (TAR) was used because it gave information on the optimal threshold of debt sustainability that would attract investments. Also, the Granger causality test was carried out to show the direction of causality among the variables. This paper concentrated on debt service to revenue and total debt stock to GDP as debt sustainability measures while investment was decomposed into public, private, and foreign investments. The paper yields that, based on the multivariate TAR analyses, the main threshold variables, that is, debt service to revenue and total debt stock to GDP, had a non-linear relationship with public, private, and foreign direct investments amidst changes in macroeconomic variables such as exchange rate, inflation, and monetary policy rate. The threshold coefficient of debt service to revenue indicated that public and foreign direct investments declined during low thresholds while private investment increased. However, the opposite prevailed when debt service to revenue exceeded the threshold values. However, the Granger causality test showed that debt service to revenue Granger caused total debt stock to GDP and exchange rate Granger caused debt service to revenue ratio, implying that exchange rate swings could affect the government's ability to service debt which in turn explains the non-linear relationship between debt sustainability and investments. Hence, it was concluded that Nigeria's lack of debt sustainability was associated with revenue generation, which explains why the models did not follow a linear path.

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Section: Literature Review Theoretical Exposition: Over Indebtednessmentioning

confidence: 99%

Section: Macroeconomic Swings Inmentioning

confidence: 99%

See 1 more Smart Citation

Government Debt Sustainability and Investments in Nigeria: Trends and Risk Thresholds amidst Macroeconomic Swings

Onyele

Ikwuagwu

Opara

2023

PJGD

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Does the Abundance of Natural Resources Crowd-Out the Manufacturing Sector? Evidence from Nigeria

Chile

Uzoechina

Eze

et al. 2021

5008

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Our objective in this study is to investigate if natural resource abundance can crowed-out the manufacturing sector in Nigeria. Under the framework of an ARDL and over a period of 1990-2019, findings of the results showed that in the short-run, natural resources positively impact on the manufacturing value added in the current period; however, after a one period lag, the contribution of natural resources to the manufacturing value added becomes negative. We also found that in the short-run, real interest rate, inflation rate and trade openness are negatively linked to the manufacturing value added, while employment in industry and gross fixed capital formation are positively related to the manufacturing value added. In the long-run, natural resources contributed positively to the manufacturing value added. The long-run results also show that the gross fixed capital formation and inflation rate negatively impact on the manufacturing valued added. The implication of our finding is that natural resources rent is closely linked to the success of the manufacturing sector and as such can also crowd-out the manufacturing sector. On grounds of these findings, we recommend, among others; that the proceeds from natural resources should be used to build critical infrastructure necessary to improve the performance of the manufacturing sector. This way, the economy can be diversified to create the needed employment.

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Relationship between Public Debt and Exports in Nigeria: A Granger Causality and Threshold Analysis Approach

M.A.¹,

O.T.²,

A.A.³

et al. 2022

African Journal of Social Sciences and Humanities Research

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This paper examines the relationship between public debt and exports of Nigeria, ranging from the period 1981 to 2017. It analyses the trend of public debt and its measure of sustainability and how it relates to the export earnings of Nigeria. Granger causality was used to test the causality effect of public debts on Nigeria's exports (oil and non-oil exports). Also, threshold regression analysis was used to investigate the relationship between public debt and exports of Nigeria. Granger causality results show that the export of goods and services of Nigeria granger causes external debt while external debt does not granger cause the export of goods and services. Domestic debt has a statistically significant influence on exports of Nigeria, but a threshold exists for this to avoid the crowding-out effect and higher interest rate, which will influence exports negatively. Hence, for Nigeria as a nation to maintain the sustainability of its domestic debt in relation to exports, there is an existence of a maximum threshold limit of ₦6,538 billion, while external debt should be below ₦3,178 billion.

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Public Debt and Economic Growth in Nigeria: Investigating the Optimal Threshold Level

Cited by 3 publications

References 12 publications

Government Debt Sustainability and Investments in Nigeria: Trends and Risk Thresholds amidst Macroeconomic Swings

Government Debt Sustainability and Investments in Nigeria: Trends and Risk Thresholds amidst Macroeconomic Swings

Does the Abundance of Natural Resources Crowd-Out the Manufacturing Sector? Evidence from Nigeria

Relationship between Public Debt and Exports in Nigeria: A Granger Causality and Threshold Analysis Approach

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