Abstract:

The study examine the impact of Public debt on Economic growth in Nigeria with a focus on establishing a threshold level where Public debt becomes detrimental to economic growth. Using annual time series from 1981 to 2022 and secondary data from CBN statistical bulletin on various issues and IMF data, the study employed the ARDL estimation technique to establish the long and short-run relationships as well as the TAR threshold technique to estimate the point of inflexion between the linear and non-linear effect of the exogenous variables on economic growth. The results of the study reveals that in the short run, domestic debt has a negative relationship with RGDP with a coefficient of -0.55, while external debt has a positive relationship with RGDP with a coefficient of 0.25. The threshold results show that domestic debt threshold with economic growth is 7.06% of Nigeria's RGDP and is significant at 5% level. This is the turning point in the relationship between domestic debt and GDP is such that it becomes asymmetrical and reveals an inverted U-shape. The study also reveals that external debts has non-threshold effect on RGDP for the period under study. The implication of this finding is that debt accumulation in excess of the estimated threshold levels could hurt economic growth. The study therefore, recommends that the government should keep debt profile within the recommended limit that is consistent with the country’s growth objectives and ensure effective and efficient utilization of borrowed funds to boost economic prosperity.

Keywords:

Public Debt, Debt threshold, and Economic Growth.

How to Cite:

Ile Chidiogo Mary. Impact of Public Debt on Economic Growth in Nigeria: The Threshold Effect. [ref]: vol.23.2025. available at: https://refpress.org/ref-vol23-a17