EFFECT OF NIGERIA DEBT STRUCTURE ON ECONOMIC PERFORMANCE

ABSTRACT

This study is on effect of Nigeria debt structure on economic performance. The total population for the study is 200 staff of CBN, Abuja. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made up HRMS, economists, senior staff and junior staff were used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies

 CHAPTER ONE

INTRODUCTION

• Background of the study

The act of borrowing creates debt. Debt, therefore, refers to the resources of money in use in an organization which is not contributed by its owners and does not in any other way belong to them (Udoka and Ogege, 2012). Public debt can either be domestic or external debt. Domestic debts are those debts incurred within the country while external debt are those debts incurred outside the shore of the country.

The question here is whether the public debt incurred by Nigeria which consists of domestic and external debts are of any consequence to the economy. Although the study does not any way, attempts to address the issue of optimal mix of domestic and external debts that will maximize economic performance in Nigeria, however, it will largely evaluate the implication to the Nigeria economy of the current structure of the prevailing public debts. The traditional finance theory as indicated by Solomon (1963), Western (1963), Lintner (1963) Posit that leverage is desirable for corporate growth irrespective of contrary opinion expressed by Modigliani and miller (1958) and (1965). The economy would however be better off with an appreciable mix of both domestic and external debts provided that the value of goods and services produced through debts financing, exceeded the costs of such debt. This position vests on the basis that interest charges and administrative expenses on borrowed funds is less than the operating earning. When extended to the macro-economy, operating earning approximate the value of goods and service generated in the economy. Debt accumulation is said to be beneficial if it promotes economic growth and welfare of the citizens. However, Smith and Todaro (2009) extensively argued that were debts are poorly managed, especially in the less developed countries, the attended debt burden could be severe and distractive with significant negative socio-economic implications. Leverage desirability theoretically emanates from the financial and economic opportunities if government of developing countries use it to finance socially and economically desirable public sector projects. These include but not limited to electricity and power supply, transportation and health care delivery services etc. These facilities are essential for the accelerated development of both public and private sectors of the developing economics.

• STATEMENT OF THE PROBLEM

Attempt to evaluate the socio-economic factors which influence debt accumulation by nations.

Appraisal of debt management techniques of specific countries and

The influence of debt on the economic performance of nations.

Arising the above Jhigan (2008) argued that less developed countries borrow to accelerate economic development through the import of capital goods, spare parts, raw materials, etc. he further asserted that developing nation’s also borrow to finance certain consumer requirement of their growing population considered as strategic for the achievement of the objective of economic growth and development of these countries. In his own contribution, Isu (1997) argued that the Western Traditional causants theory was grossly inappropriate to explain Nigeria debt accumulation. Akujuobi (20O7) concluded that external debts contributed negatively to Nigeria’s economic growth as opposed to domestic debt which contributed positively to Nigeria’s economic growth. While the debate on the relevant explanatory variables for predicting national public debts continues, it is important to mention that country specific debt burden could differ in terms of the causative factors and the influences of the domestic and external debts on the affected economies. Although it has been often acclaimed that the growth rate of the Nigerian economy in the recent times hovered between 4% and 6% range per annum, studies are still scanty on the structural analysis of Nigeria’s debt and its consequences on the growing economy, and this constitute the gap which this study need to fill this is the direction of the main trust of this study.

• OBJECTIVE OF THE STUDY

The objectives of the study are;

1. To examine the effect of Nigeria debt structure on economic performance
2. To evaluate the structural influence of public debt on Nigeria economic performance proxy by GDP at current market price
3. To ascertain the significant relationship between Nigeria debt structure and economic performance
   • RESEARCH HYPOTHESES

For the successful completion of the study, the following research hypotheses were formulated by the researcher;

H₀:   there is no effect of Nigeria debt structure on economic performance

H₁: there is effect of Nigeria debt structure on economic performance.

H₀²: there is no structural influence of public debt on Nigeria economic performance proxy by GDP at current market price

H₂: there is structural influence of public debt on Nigeria economic performance proxy by GDP at current market price

• SIGNIFICANCE OF THE STUDY

1. To the Policy Makers: the study would be useful to policy makers because of the possible implication of the result for policy decision.
2. To the Academia: the study will add to the existing body of knowledge.
3. To the General Public: the study will be useful to the public as a reading material for academic discourse.
4. To the Students: it provides an avenue to the students for further research.

1.6 SCOPE AND LIMITATION OF THE STUDY    

The scope of the study covers effect of Nigeria debt structure on economic performance. The researcher encounters some constrain which limited the scope of the study;

1. a) AVAILABILITY OF RESEARCH MATERIAL: The research material available to the researcher is insufficient, thereby limiting the study
2. b) TIME: The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.

1.7 DEFINITION OF TERMS

 DEBT STRUCTURE: The term debt structure refers to the duration and timing of principal and interest payments. The structure typically refers to characteristics such as the maturity dates, the principal repayment terms, and the provisions for prepaying the loan.

ECONOMIC PERFORMANCE: Economic growth is about rise in output, expenditure and income. Economic performance is everything about an economy- its growth, rate of price changes, unemployment, performance of current account, asset prices etc.