The Interplay of Public Debt Overhang, Investment Behavior, and Sustainable Economic Development in Nigeria

Abstract

This study examined the interplay of public debt overhang, Investment Behaviors, and Sustainable Economic Development in Nigeria. The annual time series data was collected from world development indicator and Central bank of Nigeria respectively, covering 39 years span from 1986 to 2024 were used. The expost factor research design was used for this work. The study employed the econometric estimation technique Ordinary Least Square (OLS) model was used as – well – as stationary test was conducted for the analysis, adopting annual data method of analysis. From the short run results estimated show that the all the explanatory variables were consistent with a priori expectation. This implies that a unit increase in an investment (INV), ratio domestic debt to revenue will lead to increase of about 0.4207 and 0.6269 respectively. Also, technology (TECH), Real interest rate (RINT), real exchange rate (REXCH) will lead to 0.5560, 0.000 and 0.3115. Promote Productive Investment: Since investment (INV) positively influences development by about 0.4207, government should create an enabling environment for private sector growth through tax incentives, reduction of bureaucratic barriers, and improved access to credit. This will enhance capital formation and accelerate industrial productivity. Ensure Sustainable Domestic Borrowing: The positive coefficient (0.6269) of the domestic debt to-revenue ratio suggests that borrowing can support growth when properly managed. Therefore, borrowing should be strategically directed toward productive infrastructure, not recurrent spending. The government must strengthen fiscal discipline and transparency in debt utilization to prevent future debt distress.