Domestic Debt and the Nigerian Economy
Current Research Journal of Economic Theory 2(1): 22-26, 2010 ISSN: 2042-485X © M axwell Scientific Organization, 2009 Submitted Date: December 17, 2009 Accepted Date: January 10, 2010
Published Date: January 30, 2010
Domestic Debt and the Nigerian Economy
I. Adofu and M. Abula Departm ent of Eco nom ics, Kogi S tate University, A nyigba, Nigeria
Abstract: The study investigates the empirical relationship between domestic debt and economic grow th in Nigeria. Using OLS regression techniques and the time series data from 1986 – 2005, the study explored the relationship betw een d ome stic deb t and economic growth in Nigeria. Our result shows that domestic debt has affected the growth of the economy negatively. In the light of the findings, the study recommend that Government domestic borrowing should be discouraged and that increasing the revenue base through its tax reform programames should be encouraged. Key w ords: Budget deficit, debt profit, domestic de bt, econom ic growth a nd pub lic expenditure INTRODUCTION The beginning of the existing market for government borrowing in Nigeria is the financial reforms introduced by the colonial government in 1958. These reforms saw to the creation of the Cen tral Bank of Nigeria (CBN) and the creation of Marketable Public Securities to finance fiscal deficit. According to paragraph 35 of the Central Bank of Nigeria (CBN) Ordinance 1958, the bank shall be entrusted with the issue and management of Federal Government Loans pu blicly issued in Nigeria upon such terms and conditions as may be ag reed w ithin the Federal Government and the Bank. Since the early 1960s, the ratio of do mestic government to Gro ss Dome stic Product (GDP) increased. A decade later by 1974 this ratio went up slightly to 6.9% of GDP. But by1984, the domestic debt to GDP ratio was over 40%. Although it declained slightly in the 1990s, it has since 2000 moved upward, Asogwa (2005). He further opine d that, N igeria has not been alone in
Published Date: January 30, 2010
Domestic Debt and the Nigerian Economy
I. Adofu and M. Abula Departm ent of Eco nom ics, Kogi S tate University, A nyigba, Nigeria
Abstract: The study investigates the empirical relationship between domestic debt and economic grow th in Nigeria. Using OLS regression techniques and the time series data from 1986 – 2005, the study explored the relationship betw een d ome stic deb t and economic growth in Nigeria. Our result shows that domestic debt has affected the growth of the economy negatively. In the light of the findings, the study recommend that Government domestic borrowing should be discouraged and that increasing the revenue base through its tax reform programames should be encouraged. Key w ords: Budget deficit, debt profit, domestic de bt, econom ic growth a nd pub lic expenditure INTRODUCTION The beginning of the existing market for government borrowing in Nigeria is the financial reforms introduced by the colonial government in 1958. These reforms saw to the creation of the Cen tral Bank of Nigeria (CBN) and the creation of Marketable Public Securities to finance fiscal deficit. According to paragraph 35 of the Central Bank of Nigeria (CBN) Ordinance 1958, the bank shall be entrusted with the issue and management of Federal Government Loans pu blicly issued in Nigeria upon such terms and conditions as may be ag reed w ithin the Federal Government and the Bank. Since the early 1960s, the ratio of do mestic government to Gro ss Dome stic Product (GDP) increased. A decade later by 1974 this ratio went up slightly to 6.9% of GDP. But by1984, the domestic debt to GDP ratio was over 40%. Although it declained slightly in the 1990s, it has since 2000 moved upward, Asogwa (2005). He further opine d that, N igeria has not been alone in
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