Debt and Growth Prospects of a Debtor Country: The Case of Nigeria
The main thrust of this study was to investigate the effect of domestic debt and interest rate on the economic growth of Nigeria as well as examine the crowding-out effect of private investment given the interest in the country. Data used were secondary and primary and were analysed and tested using relevant econometric analytical technique as well as Chi-square technique. The result shows a positive significant relationship between domestic debt and economic growth and an inverse relationship between interest rate and economic growth in Nigeria. It was also shown that high interest rate reduces private sector investment, thus leading to decline in gross domestic product. Therefore, the paper emphasizes the need for Nigerian government to maintain a growth-inducing level of domestic debts always and it should be ensured that these financial resources are productively deployed and utilized so that they do not constitute any drain on the future resources. The government should also formulate and implement financial policies that enhance investment-friendly rate of interest and as well take into consideration those other factors which negatively affect investment in the country.
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