Does Nigeria economic growth benefit from domestic borrowing? econometric modelling approach

Abstract

The paper examines whether Nigeria’s economic growth benefit from domestic borrowing. Time series data collected on domestic debt (DD) outstanding and real gross domestic product (RGDP) span from 1981 to 2018. Using regression with lagged exogenous, Vector autoregressive (VEC) model and Granger causality test, the results reveal that DD exacts positive effect on economic growth only at lag 1 and lag2, significant under 5% level; there is long-run relationship between DD and economic growth, and unilateral granger causality flows from DD to economic growth both in short-run and long-run. Therefore, it is advisable for the government to consider domestic window when there is necessity to borrow rather than external window for the benefit of economic growth.