Debt Financing, Governance Quality and Government Capital Expenditure in Nigeria

Ogu Callistus; Akamike Okechukwu  Joseph; Ihesie Ugochukwu Peter

doi:10.59890/ijaeam.v4i2.157

Authors

Ogu Callistus Imo State University
Akamike Okechukwu Joseph Imo State University
Ihesie Ugochukwu Peter Kingsley Ozumba Mbadiwe University Ideato

DOI:

https://doi.org/10.59890/ijaeam.v4i2.157

Keywords:

Infrastructure Delivery, Debt Stock, Debt Servicing, Governance Quality)

Abstract

This study examined the impact of debt financing and governance quality on Nigeria's infrastructure delivery from 1996 to 2024, using data from the CBN, DMO, and World Bank. Grounded in Keynesian deficit financing theory, the analysis employed the ARDL model to capture short- and long-run dynamics. The bounds test confirmed a long-run relationship among infrastructure delivery, total debt stock, debt servicing, government effectiveness, and corruption control. Long-run estimates revealed that while total debt stock had a positive but insignificant effect on infrastructure, debt servicing and government effectiveness exerted negative but insignificant effects. Crucially, control of corruption had a positive and statistically significant impact, underscoring governance's critical role. The significant error correction term indicated a moderate adjustment speed to long-run equilibrium. The model demonstrated good fit and passed all diagnostic tests. The study recommends that Nigeria enhance the productive use of public debt through transparent project selection and fiscal discipline. Strengthening governance and anti-corruption measures is essential to ensure borrowed funds translate into sustainable infrastructure development

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