TITLE:
Excessive Internal Borrowings and Debt Management: Implications on the Nigerian Economy
AUTHORS:
Victor Ebuka Okeke, Clement Nwakoby, Nonso Evaristus Okeke
KEYWORDS:
Debt Management, Internal Borrowing, Nigerian Economy
JOURNAL NAME:
Journal of Financial Risk Management,
Vol.11 No.1,
March
10,
2022
ABSTRACT: This study empirically reviewed the
implications of excessive internal borrowing and debt management with
particular emphasis on Nigeria. The study covered the period from 2000 to 2020.
The study examined the concept, growth, and causes of Nigeria’s domestic debt
problem. It went further to study the strategies employed by government in
managing domestic debt in Nigeria as well as the dominant factors that hampered
domestic debt management which are poor management of borrowed funds, high cost
of servicing domestic debt, excessive borrowings and rising budget deficit.
Data were collected majorly from secondary source which includes Central Bank of
Nigeria statistical bulletin, Debt Management Office publications and relevant
journals and textbooks on financial system. Hypothesis were formulated,
examining the impact of internal borrowings on Nigeria’s economy, it’s
relationship with domestic debt servicing and its effect on rising budget
deficit, and were tested and analyzed with the Regression analysis, correlation
analysis, and the probability significance value using the Statistical Package
for Social Science (SPSS) version 17. After the analysis, the work revealed
that internal borrowings have affected the growth of the economy negatively, a
positive relationship exists between domestic debt servicing and internal
borrowings and that rising budget deficit has a negative impact on domestic
debt. Based on these findings, the study recommends among others that the
Federal Government should lay down well considered guidelines for internal
loan, defining the purpose, duration, negotiation fee and conditions under
which it can approve and guarantee a loan. Also limit domestic borrowings and
mobilize untapped domestic resources as well as curb corruption in the country
as borrowed funds are either misapplied or embezzled. If the Government and
Debt Management Office employ the recommendations of this research, it would go
a long way in boosting economic growth and development and to a positive extent
ensure improvement in the overall economy of Nigeria.