Public Debt and Public Investment in Nigeria: An Asymmetric Investigation

Abstract: The importance of public investment in a nation cannot be overemphasized due to the crucial role it plays in the growth and development of a nation. Whenever, a country is experiencing inadequacy in its domestic revenue, it resorts to borrowing to finance its domestic investment. Borrowing to carry out development projects, increase capital expenditure and investment in productive ventures will in the long run lead to economic growth and development. Unfortunately, the pattern of Nigeria’s spending of its debt has over the years shown that the country borrows to service debt, meet current consumption and fund recurrent expenditure thereby not achieving the desired investment. Consequently, the objective of this paper is to analyze the asymmetric effect of public debt on public investment in Nigeria using time series data from 1981 to 2021. The data were estimated using the Non-linear Auto-Regressive Distributed Lag (NARDL) technique of analysis. The findings revealed that long run asymmetric effects of external debt and debt service on public investment were statistically insignificant, while the long run asymmetric effect of domestic debt on public investment was statistically significant. The result further revealed that the short run asymmetric effects of external debt, domestic debt and debt service on public investment were statistically significant. The paper recommended that the Debt Management Office (DMO) which is vested with the management of the country’s debt should advice the federal government to minimize or discourage borrowing to fund her budget by encouraging revenue generation from the non-oil sector. Furthermore, funds should be sourced from domestic sources rather than external sources for development purposes. The borrowed funds should be channeled into investment in infrastructural projects that will improve public investment. Keywords: Asymmetric, Debt Service, Deficit Financing, Domestic Debt, External Debt and Public Investment. Title: Public Debt and Public Investment in Nigeria: An Asymmetric Investigation Author: Michael S. Akpan, Awujola Abayomi, Dauda A. Impalure International Journal of Novel Research in Marketing Management and Economics ISSN 2394-7322 Vol. 11, Issue 1, January 2024 - April 2024 Page No: 9-17 Novelty Journals Website: www.noveltyjournals.com Published Date: 15-January-2024 DOI: doi.org Paper Download Link (Source) noveltyjournals.com