Nigeria’s Debt Conundrum: An Appraisal of Debt Management Strategies and their Impact on Economic Growth

Authors: Mahmood Omeiza Adeiza & Selim Mayowa Onawola

Affiliation: Department of Accounting, Faculty of Management Sciences, Usmanu Danfodiyo University, Sokoto

Corresponding Author: [email protected]

November 21, 2025

SIAR-Global Journal of Economics, Finance & Accounting

DOI: 10.5281/zenodo.17672392

Nigeria’s Debt Conundrum: An Appraisal of Debt Management Strategies and their Impact on Economic Growth

Research Article Management

Abstract

This study investigated the relationship among debt management strategies and economic growth in Nigeria over a 34-year period between 1990 and 2023. Nigeria’s persistent debt accumulation, heavy debt-servicing obligations, and fiscal vulnerability raise pressing questions about the effectiveness of existing strategies in fostering sustainable development. While borrowing potentially stimulated growth by bridging resource gaps, the country’s rising debt profile — combined with exchange rate volatility, high interest rates, and weak governance —generated more concerns about debt sustainability. The specific objectives of this study were to examine the effect of external debt on economic growth, the impact of debt servicing on growth, and the moderating effect of institutional quality on the relationship between Nigeria’s debt and economic growth. Secondary data for macroeconomic indicators such as GDP growth, external and domestic debt, debt servicing, exchange rate, and interest rate were sourced from the Central Bank of Nigeria, Debt Management Office, World Bank, and International Monetary Fund (IMF). The Autoregressive Distributed Lag (ARDL) model was employed to capture both short-run and longrun dynamics among the variables. The empirical analyses revealed three key findings. First, external debt exerted a significant negative impact on growth in both the short and long run, underscoring the risks of overreliance on foreign borrowing amid exchange rate depreciation and global interest rate pressures. Second, debt servicing obligations severely constrained economic growth, as the diversion of revenues (often exceeding 90% of federal income) to debt repayment crowded out public investments in education, healthcare, and infrastructure. This burden was further amplified by exchange rate depreciation and high domestic interest rates. Third, institutional quality was found to significantly moderate the debt–economic growth relationship as strong governance, transparency, and accountability mitigated the adverse effects. However, weak institutions exacerbated fiscal vulnerabilities thus, the study recommends; cautious and strategic borrowing, enhanced domestic revenue mobilization, and strengthened institutional frameworks.

Keywords

Debt Management, Debt Servicing, Economic Growth, External Debt, Institutional Quality, Nigeria

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Mahmood Omeiza Adeiza & Selim Mayowa Onawola (2025). Nigeria’s Debt Conundrum: An Appraisal of Debt Management Strategies and their Impact on Economic Growth. SIAR-Global Journal of Economics, Finance & Accounting, Vol. 1, No. 1. DOI: 10.5281/zenodo.17672392

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Nigeria’s Debt Conundrum: An Appraisal of Debt Management Strategies and their Impact on Economic Growth

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