Acta Universitatis Danubius. Œconomica, Vol 15, No 7 (2019)

Public Debt Sustainability in Nigeria after the Exit from Paris Club: The Role of Structural Breaks

Adewumi Otonne, Zachariah Emmanuel, Onyinye Jane Asogwa


The aim of this paper is to provide new evidence on public debt sustainability in Nigeria after the exit from Paris Club. The study contributes to the vast amount of literature by accounting for the role of structural breaks in the series. Data between 1988 and 2016 were collected and the modified Augmented Dickey-Fuller unit root test was used to account for the effect of structural breaks in the series. In addition, the Autoregressive Distributed Lag (ARDL) fiscal reaction function Bounds Cointegration technique was used to estimate the short and long run function of public debt sustainability in Nigeria. The results obtained show that fiscal actions by the Nigerian government are not sustainable. While we observed that government revenue has been declining over the years, its fiscal spending keeps rising. Essentially, we find a wide gap between government revenue and its fiscal spending. As a result, government has not been able to meet up with its fiscal obligations over the years. Therefore, we recommend that government should reduce its overdependence on crude oil revenue, and harness other potential revenue generating commodities such as the agricultural sectors in order to reduce its debt burden.


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