Debt and Debt Volatility: Effect on Economic Growth in Nigeri – Data Analysis

The study test his effect of the volatility of national debt and national debt volatility on the gross domestic product ( GDP ) between 1987-2008.To ensure this stability of his variable the unit out rest using the Augmented Dickey-Fuller (ADF) test was carried out on the variable. The result is shown as follow (Dickey and Fuller 1981). The result in table 3 show the least square regression model, expressing GDP as the function of National Debt, National debt volatility and GDP. The result of the regression reveals an R2 of 0.935 or 94%. This means that the determinant variables have effect on GDP to a 94% extent. There exist a high positive relationship between the dependent variable and the explanatory variables. Also, the coefficient of determination stand at 0.927 or 93% which means that 93% changes in the dependent variables (GDP) is caused by the explanatory variables.
The effect of each variable on the explained variable (GDP) revealed that National Debt and National debt volatility are not significant at 0.05 and 0.01 level. However, GDP is significant at 0.05. Thus, a change in GDP is strongly influenced by the lag of the GDP. Hence, the previous GDP value influences the current GDP. However, the change in the National Debt does not bring about any effective change in GDP.
There is no any meaningful shock in National Debt neither do the square of the residual of National Debt constituting any significant effect on the GDP. Thus, other exogenous variables aside National debt provoke change in the GDP in Nigeria within the period covered. However, the probability of F- Statistics is significant at 5%, which suggest that the explanatory variables are significant measure of the dependent variable.
Findings, Conclusion and Recommendation
The study reveals that the independent variables combined significantly influence changes in the Gross Domestic Product as revealed by the f-statistic. The study also reveals that there is no shock effect on National Debt and that National Debt volatility does not impact on GDP. This means that the huge stock of national debt do not bring about any serious changes in GDP. If any relationship exists, it is a negative one that national debt negatively affects the Gross Domestic Product (GDP). It suggests that the loan stock does not really translate to any growth in the GDP of Nigeria. However, the GDP is largely influence by the lag of GDP. Thus, the past value of GDP influences the current value. fully
The study unveils a high impact relationship between the gross domestic product and the combined factors of national debt, national debt volatility, and lag of gross domestic product. However, it would be concluded that national debt does not about any valuable change in the gross domestic product. Most changes in GDP, is brought about by the lag of GDP. The following are the recommendations stemming form the study:
1)The    government should put in place a policy that will direct loan stock towards direct investment factor.
2)The    government should ensure that the non -productive existing loan stock should be settled. Also, future loan stock should have public -private participation scheme such that commutated infrastructural facility is developed from the loan stock. Those infrastructure should be such that proved directly related to growth in the economy.

Table-1: Augmented Dickey-Fuller Tests

t-statistic Dec. rule Probabili ty
GDP -6.714198 I(O) 0.0000
NDebt -6.777534 1 0.0000
NDeb tVol -6.33991 1 0.0000

Table-2: Volatility Test Breusch-Pagan-Godfry: Arch Test

Prob t-statistic
N Debt 0.1957 1.327922
GDP 0.0263 2.355
GARCH(-l) 0.0000 -5,094902


Co-efficient Probability
с 82758.42 0.4083
NDebt -0.777459 0.7473
GDP 1.107004 0.0000
NDebtVol -0.391930 0.9203
R — Squared 0.935328
Adjusted R2 0.927244
P ratio (F- 0.0000