Abstract

This study examined the effect of public borrowing on growth of the Nigerian economy over the period 1980 – 2015. Employing the ARDL method in analysing data sourced from the CBN and World Bank, the results indicated that external debt positively and significantly stimulated growth while domestic debt significantly retarded growth in Nigeria both in the long and short runs. Total debt services stock was found from our result to negatively and insignificantly affected economic growth while net foreign direct investment and foreign exchange reserves impacted on economic growth positively and were both significant at 5% level at lag 3. Though the goodness of fit was robust and reasonable in explaining changes in growth, the nonsignificance of the error correction term implies that economic growth reacts slowly to changes in public debts dynamics in Nigeria. Based on this results, the study recommends: reduction in local borrowing to enhance private investment, prudent utilization of borrowed funds to enhance results, better debt management strategies to ensure efficiency and borrowing from organization with low interest rate and longer term in order to reduce the burden on the economy and the growth of the economy.