The sustainability of public debt in Nigeria

Abstract

The study investigated the sustainability of public debt in Nigeria between 1986 to 2021 in the face of rising budget deficit and government expenditure with a significant loss of revenue amidst the COVID-19 pandemic. The study adopted the present value budget constraint (PVBC) approach using stationarity tests for the variables involved and a co-integration analysis to assess if the country’s debt profile is sustainable or not. The result shows a long-run relationship between the natural logarithm of government expenditure and its determinants such as debt-to-GDP ratio, oil revenue, inflation tax, etc., which suggests that PVBC holds, and the Nigerian public debt is sustainable within the reviewed period. The study concludes that the Nigerian public debt profile has remained within internationally acceptable limits of sustainability since the external debt relief in 2005.