MODERATING EFFECT OF PUBLIC DEBT ON THE RELATIONSHIP BETWEEN GOVERNANCE EXPENDITURE AND ECONOMIC GROWTH IN NIGERIA

Abstract

The effectiveness of government expenditure in promoting economic growth in Nigeria was increasingly complicated by rising levels of public debt, which raised concerns about fiscal sustainability and the actual impact of debt-financed public spending on economic outcomes. The study examined the moderating effect of public debt on the relationship between governance expenditure and economic growth in Nigeria. The study employed an ex-post facto research design and utilized secondary data sourced from the Central Bank of Nigeria Statistical Bulletin covering the period from 1985 to 2024, comprising 40 observations. Autoregressive Distributed Lag (ARDL) model was employed for data analysis. The study found that total government expenditure has a positive and significant effect on economic growth in both the short-run and long-run, while public debt alone showed no significant direct effect on growth; however, public debt significantly and negatively moderated the relationship between total government expenditure and economic growth. It was recommended that the Nigerian government maintain public debt within sustainable thresholds to preserve the effectiveness of fiscal policy, and that government spending be redirected toward high-multiplier capital investments in infrastructure, health, and education.