Domestic Debt and Sectoral Outputs in Nigeria: Focus on Agricultural and Manufacturing Sectors (Published)
This study investigated the long-run impact of domestic debt on sectoral output in Nigeria, focusing specifically on the agricultural and manufacturing sectors. Data for the study composed of the agricultural sector output (AGRS) and manufacturing sector output (MANS) which served as the dependent variables, Domestic Debt Stock (DDD), Domestic Debt Servicing (DDS), Interest Rate (INT) and Inflation Rate (INF) as explanatory variables. Data were sourced from the Central Bank of Nigeria statistical bulletin. All the series were subjected to unit root test and cointegration test. The result of the Augmented Dickey Fuller showed that all the series were stationary at first difference and there was existence of long run relationship among the series as confirmed by the Johansen’s cointegration test. The estimation was carried out utilizing annual time-series data from 1985 to 2023, employing the Fully Modified Ordinary Least Squares (FMOLS) estimation technique. The study provided a robust econometric assessment of the sector-specific implications of debt dynamics. The FMOLS results indicated that while domestic debt servicing positively impacted manufacturing output, domestic debt stock exerted significant impact on agricultural sector. The findings of the study showed that domestic debt could enhance sectoral output when efficiently utilized and excessive debt servicing might crowd out productive investments. The study recommended concrete policies for optimizing domestic debt management that would foster sectoral growth. The study also recommended the restructuring of debt management policies to channel borrowed funds effectively toward productive sectoral investments.
Keywords: Agricultural Sector, Debt Servicing, Domestic debt, FMOLS., Inflation, Interest Rate, Manufacturing sector, sectoral output