DOMESTIC DEBT AND PUBLIC EXPENDITURE: EVIDENCE FROM SOUTHWEST REGION OF NIGERIA

  • Clement Olatunji Olaoye
  • Adeduro Adesola Ogunmakin
  • Abiodun Rafiat AYENI-AGBAJE
  • Funmilayo Bukola ALONGE
Keywords: Domestic Debt, Public Expenditure, Capital Expenditure, Recurrent Expenditure, State Governments

Abstract

Government borrowings in terms of domestic debts are growing geometrically however, it appeared that the infrastructural and operational development of the federating blocks of Nigeria are not increasing commensurately. To satisfy this empirically, this study was conducted to examine the effect of domestic debt on public expenditure across all the state governments in the southwest region of Nigeria, using panel regression. The study covered 8 years, spanning from 2011 to 2018 and the panel data used was sourced from the CBN statistical bulletin (2019) and the annual budget of each of the sampled states. It was discovered that domestic debt exerts a positive but insignificant effect on recurrent expenditure of all the states in the southwest region of Nigeria to the tune of 0.1096(p=0.352>0.05) and that domestic debt exerts a negative and insignificant effect on capital expenditure of all the states in the southwest region of Nigeria to the tune of -0.0485>0.733. It was established that while domestic debt could not improve recurrent expenditure significantly, it has the potency to decrease capital expenditure of state governments in the southwest region of Nigeria. Thus, it was recommended that while it might necessary for the state governments to borrow money to finance budget deficit, they should always set their priorities right and ensure that resources are allocated to the most productive sector of the economy.

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Published
2023-07-12