Babcock Journal of Economics: ISSN: 2734-2239


Authors: Agiri Moyosoreoluwa , Oyedele Ovikuomagbe ,

Pages: (36-53 )


This study examined the effect of public debt on welfare in Nigeria using secondary data from 1981 to 2019. The data used were obtained from the  Central Bank of Nigeria Statistical Bulletin (2019) and  World Banks’s World Development Indicators (2019). The Augmented Dickey Fuller test and Phillips-Perron test were used to test for the stationarity of the variables. Variables of research interest were public debt decomposed into domestic public debt and foreign public debt. Other data include household final consumption expenditure, real gross domestic product, total government expenditure, total government revenue and real interest rate. The Bounds co-integration test showed a long run relationship among the dependent and independent variables. The Autoregressive Distributed Lag (ARDL) method was employed to estimate the model. The results showed that domestic public debt had a positive significant effect on welfare in both the short run and the long run. However, foreign public debt did not have a significant effect on welfare in both short and long run. Real gross domestic product and real interest rate were found to have a significant effect on welfare in the short run. In the long run, they both had an insignificant effect on welfare. Government expenditure and government revenue both had an insignificant effect on welfare in the short run and in the long run. The results revealed a two-way causal relationship between domestic public debt and welfare. However, there was no causal relationship between foreign public debt and welfare. Effective debt management systems and intentional strategies should be put in place to ensure that domestic and foreign loans are used for public investments that directly and efficiently increase welfare.

Keywords: Keywords: Welfare, Domestic Public Debt, Foreign Public Debt, ARDL Model.,

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