THE IMPACT OF DEBT FINANCING ON ECONOMIC GROWTH OF NIGERIA
Abstract
This study examines the impact of debt financing on the economic growth of Nigeria. It focuses on how both domestic and external debt influence key economic indicators, particularly Gross Domestic Product (GDP). The research adopts a quantitative approach using secondary data obtained from reliable sources such as the Central Bank of Nigeria (CBN) and the World Bank. Statistical tools, including regression analysis, are employed to evaluate the relationship between debt financing and economic growth over a specified period.
Findings from the study reveal that while debt financing can stimulate economic growth when properly managed and invested in productive sectors, excessive and poorly utilized debt poses a significant threat to Nigeria’s economic stability. The study also highlights issues such as high debt servicing costs, mismanagement of borrowed funds, and reliance on external borrowing, which limit the positive effects of debt on growth.
The study concludes that debt financing has a mixed impact on Nigeria’s economic growth and recommends that government should ensure prudent debt management, transparency, and investment in growth-enhancing sectors to maximize the benefits of borrowing while minimizing its adverse effects.
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