IMPACT OF DOMESTIC DEBT AND HOUSEHOLD CONSUMPTION EXPENDITURE ON ECONOMIC GROWTH IN NIGERIA (1986-2023).

ABSTRACT This study examines the impact of domestic debt and household consumption expenditure on economic growth in Nigeria from 1986 to 2023. Using annual time series data from the Central Bank of Nigeria, National Bureau of Statistics, and Debt Management Office, the research employed Augmented Dickey-Fuller unit root tests, Johansen cointegration analysis, and Vector Error Correction Model (VECM) to analyze the relationships among the variables. The Johansen cointegration test confirmed stable long-run equilibrium relationships among the variables. Results show that household consumption expenditure has a significant positive impact on economic growth with a long-run elasticity of 0.4823, while both domestic debt (-0.1834) and external debt (-0.2156) negatively affect long-run growth. The error correction mechanism indicates that 34.56% of short-run deviations are corrected annually. The findings reveal that Nigeria operates as a consumption-driven economy where household spending serves as the primary growth engine, while debt accumulation constrains long-term expansion through crowding-out effects. The study recommends prioritizing policies that enhance household purchasing power over debt-financed government programs and establishing domestic debt ceilings to prevent adverse growth effects.