IMPACT OF DEBT ACCUMULATION ON THE NIGERIA ECONOMIC GROWTH

The need for many developing countries to bridge the gap between their savings and investments in order to achieve economic growth is very pertinent in the society of today. This need arises from the dearth of sustainable government revenue channels in the country. Hence, this can inevitably resort to external financing. This research study investigates the impact of debt accumulation on economic growth in Nigeria. Specifically, this research estimates the long run relationship existing between debt accumulation and economic growth. It also analyses the direction of causality between the variables. The research study uses secondary data covering a time frame of 33 years (1985 – 2018). Econometric advances of unit root, co-integration, error correction techniques as well as granger causality tests were deployed to ascertain the order of co-integration and levels of relationships. With the aid of E-views statistical package-version 7.0, robust models for estimating the impact of debt accumulation on the economic growth of Nigeria were developed. The results revealed that there exist 5 co-integrating equations existing between the variables. It also revealed that debt does not granger cause economic growth, whereas economic growth granger causes debt. The final estimation technique employed in the course of this research study revealed that there exists a negative or an inverse relationship between debt accumulation and economic growth, leading to a decrease in economic growth whenever debt increases. This fulfils a priori expectation as well as conforms to previous literatures on debts. There is no need to wait for debt crisis before starting management of debt. Moreover, management of debt should be part of the economic policies of the nation in its day-to-day activities. In addition, the study recommends that external borrowings should be channelled to the real sectors of the economy as against social consumption. The funds should be properly managed in order to avoid wastages and mismatch. More also, mechanism that prevent the diversion of the funds should be implemented.