Global Journal of Education, Finance and Management (GJEFM)

Public Debt in Nigeria: A Channel to Accelerate Production or Consumption

Ifeanyichukwu, Amabuike, Lucky, Elizabeth, Asiegbulem, Afoma, Bridget, Odo

3 October 2026 · Vol. 2, Issue 10, pp. 369-378

DOI: 10.65150/EP-gjefm/V2E10/2026-01

Abstract

Public debt is a major fiscal policy instrument in Nigeria, but its contribution to economic development depends on whether borrowed resources are directed toward productive investment or consumption. This study examines whether public debt operates more strongly through a production or consumption channel in Nigeria using annual data from 1985–2024. Two separate models are estimated using the Autoregressive Distributed Lag (ARDL) approach, with real gross domestic product (RGDP) representing the production channel and private consumption expenditure (PC) representing the consumption channel. The models include government capital expenditure, government revenue, gross fixed capital formation, interest rate, inflation and exchange rate as control variables. The Augmented Dickey-Fuller test indicates that most variables are integrated of order one, I(1), while inflation is stationary at level, I(0), justifying the application of the ARDL bounds-testing technique. The bounds tests confirm long-run relationships in both models, with F-statistics of 5.7330 for the RGDP model and 6.0971 for the PC model. The results show that public debt has a negative and significant second-lag effect on RGDP, suggesting that prolonged debt accumulation may constrain economic output through rising debt-service obligations and reduced fiscal space. In the consumption model, public debt initially supports private consumption but subsequently exerts a negative effect, indicating that debt-financed spending may provide temporary consumption benefits while creating longer-term pressures. Government capital expenditure positively affects both RGDP and private consumption, although its lagged negative effect on RGDP highlights concerns regarding the efficiency of public investment. Exchange-rate depreciation significantly reduces private consumption, while government revenue exerts a positive delayed effect in both models. The study concludes that the developmental impact of public debt depends primarily on its utilisation rather than accumulation alone. It recommends prudent debt management, prioritisation of productive investment, reduced dependence on debt-financed consumption, stronger domestic revenue mobilisation and improved efficiency in public expenditure to promote sustainable growth and household welfare.

Keywords: Public debt, economic growth, private consumption, government expenditure, exchange rate, government revenue, ARDL, Nigeria.

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Ifeanyichukwu, Amabuike, Lucky, Elizabeth, Asiegbulem, Afoma, Bridget, & Odo (2026). Public Debt in Nigeria: A Channel to Accelerate Production or Consumption. Global Journal of Education, Finance and Management, 2(10), 369-378. https://doi.org/10.65150/EP-gjefm/V2E10/2026-01

@article{Ifeanyichukwu2026,
  title   = {Public Debt in Nigeria: A Channel to Accelerate Production or Consumption},
  author  = {Ifeanyichukwu and Amabuike and Lucky and Elizabeth and Asiegbulem and Afoma and Bridget and Odo},
  journal = {Global Journal of Education, Finance and Management},
  year    = {2026},
  volume  = {2},
  number  = {10},
  pages   = {369-378},
  doi     = {10.65150/EP-gjefm/V2E10/2026-01},
  url     = {https://doi.org/10.65150/EP-gjefm/V2E10/2026-01}
}

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