This work is an empirical investigation of the relationship between domestic debt and the poverty of Nigeria (1986-2012), using the Ordinary Least Square Technique, Vector Auto regression (VAR), Cointegration and Granger Causality Approaches. Using Johansen Cointegration technique, estimated results revealed that there is a long-run relationship between poverty {measured by real gross domestic product (RGDP), per capita gross domestic product (GDPPC), and basic secondary school enrolment} and domestic debt in Nigeria. The study equally reveals that the domestic debt coefficient has positive impact on bank credit and this impact is highly significant. Such credit provides place for rural development project so as to reverse the chaotic trend of urbanization, industrialization, and create lucrative market advancement in the country’s manufacturing sector, thereby, improving the welfare of the citizens. Hence, the study recommends that Government should make efforts to settle the outstanding domestic debt. This will give room for proper conduct of monetary policy in the economy. This is necessary because excessive domestic debt sometimes have negative effect on growth, if it persists. The study equally recommends that Government should make available cheaper funds to the investing public so as to help them boost their various investment activities.
Keywords: Basic Secondary School Enrolment, Per capita Gross Domestic Product, Poverty, Real Gross Domestic Product
