Impact of sub national public debt on economic growth in Nigeria

Abstract

This study investigated the relationship between sub national public debt and economic growth in Nigeria from 1981-2019. This study adopted the endogenous growth theory as the theoretical framework guiding the study. An OLS multiple regression model was used. All variables were found to be normally distributed and free from autocorrelation, heteroskedasticity as well as multicollinearity. The study provided evidence of a positive relationship but not significant between sub national public debt and economic growth in Nigeria. Population growth and sub national capital expenditure also has a positive relationship but not significant relationships with economic growth. Sub national government budget deficit have a negative impact on economic growth although not significant. When the exchange rate was introduced a moderating variable in the model there was a negative relationship between sub national public debt and economic growths. This means that foreign exchange rate is important in determining the direction of sub national public debt in Nigeria. The study recommends that state governments should direct borrowings to capital projects which will improve the growth through employment and income generation.