PUBLIC DEBT BURDEN AND ECONOMIC GROWTH IN EMERGING ECONOMIES: A COMPARATIVE ANALYSIS OF NIGERIA, GHANA AND SOUTH AFRICA

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ABSTRACT

This study analyzed the effect of public debt burden on economic growth of three sub-Saharan African economies (SSA), for a period of forty-one years; from 1981 to 2021. Public debt burden was measured by public debt servicing to revenue ratio, total debt to GDP ratio, public external debt to export receipts ratio, public domestic debt to domestic investments ratio, public debt burden for infrastructural development (measured by capital expenditure to GDP ratio) and public debt burden for recurrent expenditure (measured by recurrent expenditure to GDP ratio) while fiscal balance and trade openness were used as control variables. Ex post facto research design was used in a multiple regression analysis framework to determine the partial coefficients of the endogenous variables. First, pre-testing of data for unit root based on the Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) approaches were carried out. The ADF and PP tests showed that the series of data were of mixed integration, that a combination of levels and first difference variables which necessitated the application of Autoregressive Distributed Lag (ARDL) model. The ARDL results indicated that the relationship between public debt burden and economic growth followed a long-run path which was confirmed from the F-statistic of the ARDL bounds test. Chiefly, the results provided evidence that the effect of public debt burden varied among Nigeria, South Africa and Ghana. In the long run, the Nigerian economic growth was majorly affected by public debt servicing to revenue ratio, public external debt to export receipts ratio, public debt burden for infrastructural development, fiscal balance and trade openness. South Africa’s long-run economic growth was significantly driven by public external debt to export receipts ratio, public domestic debt to domestic investments ratio and public debt burden for infrastructural development. Ghana’s long-run economic growth was significantly affected by total debt to GDP ratio and public domestic debt to domestic investments ratio. The error correction mechanism of the ARDL model indicated that the speed of recovery to long-run equilibrium was faster for Ghana, followed by South Africa and Nigeria, respectively. From the policy perspective, the findings are of particular interest to government authorities saddled with the responsibility of managing the debt profile and economy. It was suggested that the government should focus on viable capital investments that have high returns that can help service public debt in the nearest future in order not to pass debt to the upcoming generations as an inheritance in the selected SSA nations.






TABLE OF CONTENTS

Title Page                                                                                                                                i

Declaration                                                                                                                             ii

Certification                                                                                                                                 iii

Dedication                                                                                                                                    iv

Acknowledgement                                                                                                                        v

Table of Contents                                                                                                            .           vi

List of Tables                                                                                                                                    x

List of Figures                                                                                                                         xi

Abstract                                                                                                                                   xii                                                                                                                                                                   

CHAPTER 1:  INTRODUCTION

1.1 Background to the Study                                                                                                  1

1.2 Statement of the Problem                                                                                                 5

1.3 Objectives of the Study                                                                                                    8

1.4 Research Questions                                                                                                          9

1.5 Hypotheses                                                                                                                       9

1.6 Scope of the Study                                                                                                            10

1.7 Limitations of the Study                                                                                                   11

1.8 Significance of the Study                                                                                                 11

 

CHAPTER 2: LITERATURE REVIEW

2.1 Conceptual Framework                                                                                                    13

2.1.1 Concept of public debt                                                                                                   13

2.1.2 The burden of rising public debt                                                                                   15

2.1.3 Domestic versus external debt                                                                                       16

2.1.4 Public debt instruments                                                                                                 18

2.1.5 The effect of debt on the domestic economy                                                                20

2.1.6 Concept of economic growth                                                                                        23

2.1.7 Public debt- economic growth relationship                                                                   24

2.2   Nigeria’s Public Debt: A Brief History                                                                          28

2.2.1 Overview of Nigeria’s public debt status                                                                      32

2.3    Causes of the Astronomical Growth in Nigeria’s external debt                                 35

2.3.1 Endogenous factors                                                                                                       35

2.3.2 Exogenous factors                                                                                                         37

2.3.3 Total domestic debt: composition and analysis                                                             44

2.4    The Evolution of Public Debt in South Africa                                                               45

2.4.1 Public debt reforms in South Africa                                                                              48

2.4.2 Public debt and economic growth trends in South Africa                                             54

2.4.3 Domestic public debt trend in South Africa                                                                  55

2.4.4 Foreign public debt trend in South Africa                                                                     62

2.5 Ghana’s Public Debt trajectory                                                                                        63

2.5.1 Debt crisis and debt cancellation                                                                                  64

 

2.5.2 The growth in Ghana’s external debt                                                                            65

2.5.3 Domestic debt                                                                                                                66

2.5.4 Commodity and lending boom, and manufacturing decline                                         69

2.5.5 Commodity price crash and the new debt trap                                                              70

2.6   Theoretical Framework                                                                                                  72

2.6.1   Neoclassical views                                                                                                       72

2.6.2   Keynesian and New-Keynesian views                                                                        81

2.6.3   Public finance                                                                                                              83

2.7 Review of Empirical Literature                                                                                        86

2.7.1 Evidence from Nigeria                                                                                                  86

2.7.2 Evidence from Ghana                                                                                                    91

2.7.3 Evidence from South Africa                                                                                          94

2.7.4 Evidence from other developing and developed Countries                                           94

2.7.5 Summary of related literature review                                                                            101

2.7.6 Gap in empirical literature                                                                                             107

 

CHAPTER 3: METHODOLOGY

3.1 Research Design                                                                                                               108

3.2 Nature and Sources of Data                                                                                              108

3.3 Model Specification                                                                                                         109

3.3.1 Description of model variables                                                                                     111

3.3.1.1 Dependent variable                                                                                                     111

3.3.1.2 Independent variables                                                                                                 112

3.4   Justification of Variables in the Models                                                                         114

3.5 Analytical Procedures                                                                                                       118

3.5.1 Unit root test                                                                                                                  118

3.5.2 Autoregressive distributed lag (ARDL) bounds testing                                                120

3.5.3 Co integration test                                                                                                         121

3.5.4 Coefficient estimation                                                                                                   122

CHAPTER 4: PRESENTATION OF DATA, ANALYSIS AND DISCUSSION

4.1   Presentation of Data                                                                                                       124

4.2   Trend Analysis of Data                                                                                                   127

4.2.1 Descriptive statistic                                                                                                       135

4.2.2 Test for multicollinearity                                                                                              140

4.3 Test for Stationarity                                                                                                          141

4.4 Lag Selection Criteria                                                                                                       144

4.5 ARDL Bounds Testing and Estimation                                                                            147

4.3.1 Long-run ARDL estimates                                                                                            150

4.3.2 Error correction mechanisms (ECMs) and short-run dynamics                                  155

4.3.3 Hypothesis testing                                                                                                         160

4.3.4 Diagnostic tests                                                                                                              164

4.4 Discussion of Findings                                                                                                     166

 

CHAPTER 5: SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.1 Summary of Findings                                                                                                       170

5.2 Conclusion                                                                                                                        171

5.3 Recommendations                                                                                                            172

5.4 Contribution to Knowledge                                                                                              174

REFERENCES                                                                                                                       175

APPENDICES                                                                                                                        189

 

 

 



 

 

LIST OF TABLES

 

2.1       Nigeria’s external public debt outstanding (1981 – 2019 in Billions of Naira)   39

2.2           Nigeria’s external debt servicing (1981 – 2019) in NGN’ billion.                  42

2.3            Nigeria’s external debt by lenders (as at 31st December, 2020)                    44

2.4             Domestic debt profile of Nigeria                                                                    45

2.5 Composition of domestic public debt in South Africa (by instrument) (2012-2017) 57

2.6          Structure of domestic public debt in South Africa (1970-2015)                       58

2.7              Domestic government bond in South Africa (by holder) 2010 – 2017         61

2.8              Summary of empirical literature review                                                      101

 

3.1             Operationalization of variables                                                                     114

 

   4.1(A)          Data for Nigeria                                                                                             125

 

   4.1(B)          Data for South Africa                                                                                    126

 

    4.1(C)          Data for Ghana                                                                                             127

    4.2                Descriptive statistic                                                                                     136

    4.3                Variance Inflation Factor (VIF)                                                                   141

   4.4 (A)          Augmented Dickey-Fuller (ADF) test for unit root                                    142

   4.4 (B)          Phillips-Perron (PP) test for unit root                                                         143

   4.5                VAR lag order selection criteria                                                                  144

   4.6                 Short- run estimates for the Models                                                           145

   4.7                 Bounds test for cointegration                                                                      149

  4.8                  Results of long-run ARDL estimates                                                          151

  4.9 (A)          ECM for the Nigerian model                                                                       155

  4.9 (B)          ECM for the South African model                                                              156

 4.89(C)            ECM for the Ghanaian model                                                                    157

 4.10                  Diagnostic tests                                                                                          164






                                                         LIST OF FIGURES

                                                                                                                      

2.1       Link between fiscal policy tools of government and economic growth              27

2.2        Nigeria’s public debt (1923 – 1953)                                                                   29

2.3         Nigeria’s public debt (2012 – 2020)                                                                   31

2.4          Actual deficit and public debt in Nigeria (N'trilliom)                                       34

2.5          Federal government expenditure & revenue for 2015 and 2019                       34

2.6          Federal and State government percentage of total external debt.                      41

2.7         Ghana’s external debt profile 2006- 2020 as percentage of GDP                        68

 4.1         Trend of GDP per capita growth rate (GDPgr)                                                  127

4.2           Trend of public debt service to revenue ratio (PDS)                                         128

4.3           Trend of total public debt stock to GDP ratio (TPD)                                        139

4.4           Trend of public external debt stock to export ratio (PED)                                130

4.5           Trend of public domestic debt stock to investment ratio (PDD)                       131

4.6           Trend of public debt for infrastructural development to GDP ratio (PDI)        132

4.7           Trend of Public debt for recurrent expenditure to GDP ratio (PDR)                133

4.8           Trend of fiscal balance to GDP ratio (FIB)                                                      133

4.9           Trend of trade openness to GDP ratio (TOP)                                                   134

4.10          AIC model selection plot for Nigeria                                                               147

4.11          AIC model selection plot for South Africa                                                       148

4.12           AIC model selection plot for Ghana                                                                148

4. 13 (A)    CUSUM test for Nigeria                                                                                 165

 4. 13 (B)   CUSUMSQ test for South Africa                                                                    165

4.13(A):     CUSUM test for Ghana                                                                                   165

                                                  

 

 


 

 

 

 

CHAPTER 1

INTRODUCTION

1.1  BACKGROUND TO THE STUDY

Sustainable economic growth has overtime been regarded as a predominant concern of all economies (Ajayi and Edewusi, 2020). It is one of the prerequisites for improving standard of living of societies and an important indicator of economic well- being. The most effective tool for economic growth is sound macroeconomic policies focusing on both private and public investment to generate wealth, increase productivity, national income and employment, reduce inflation, and finance public service provision (Saungweme and Mufandaedza, 2018). However, most countries are unable to generate enough revenue to finance national budgets which make them rely on both domestic and external debts, thereby making public debt one of the major economic policy issues confronting governments today (Mankiw, 2020).

Debt or borrowing has been described as an important instrument of fiscal policy available to government to fund the development of a nation. Debt is employed for the settlement of expenditures that will ultimately increase productivity and improve the growth of the economy, although, studies have suggested that public debt impacts negatively on the growth of most developing economies. These studies opined that when the cost of servicing debt expands beyond the coping capacity of the economy, it impacts negatively on its ability to achieve the desired fiscal and monetary policy objectives and this may constrain the ability of government to undertake more productive investment programmes in infrastructure, education and public health thereby impeding economic growth (Mhlaba and Phiri, 2019; Huang, Panizza, and Varghese, 2018; Muhammad, Ruhaini, Nathan and Arshad, 2017).

 However, continuous budget deficits by nations demonstrate that government expenditure is high relative to its revenue and this gap has been identified to be filled with public debt (Mankiw, 2020). Public debt which includes both internal (domestic) and external debts is considered when the revenue realized by the government is insufficient for its projected expenditures (Rahman, Ismail and Ridzuan, 2019)).

The issue of the third world debt especially that of emerging market economies of Sub-Saharan Africa has been on the centre stage in international discussion for the past three decades. The debt crisis of these emerging nations evolved from a complex combination of factors, some of which are external while others were the result of the internal policies pursued by the African governments. A major cause of the African debt crisis was the two oil price shocks of the early and late 1970s. To be precise, the oil price hike of 1973 to 1974 changed the international environment, leading to macroeconomic deterioration in Africa. The unprecedented increase in oil prices distorted the trade balance of oil importing countries and created fiscal deficits that undermined domestic investment (UNCTAD, 2017).

The situation became worse during the second oil shock of 1979 to 1980 which happened jointly with a sharp increase in world real interest rates. The global recession of 1981-1982 compounded the problem by adversely depressing demand for the key exports of developing countries. Moreover, the deteriorating terms of trade caused by the recession created balance of payment problems for oil exporters and worsened those of oil importers. However, based on the assumption that the global recession would be short-lived and that prices of non-fuel commodities would recover quickly, most of these countries resorted to heavy external borrowing to finance the fiscal and external imbalances. However, the 1982 global financial crisis caused a sudden end to the era of liberal lending. Developing Countries could no more roll over their debts and could hardly service their debt from extra borrowing from abroad. Export earnings were also insufficient for debt servicing as a result of unfavourable terms of trade confronting those economies. Debt stocks of countries were escalating at a time when export earnings were on the decline due to rapid fall in prices on the international market. Consequently, imports were being gradually cut down as a way of solving increasing current account deficits. Economic condition further worsened globally and debt default replicated in other economies ravaging through Latin America and this marked the emergence of the debt crisis in heavily indebted developing economies as well as Sub-Saharan Africa (Agbemavor, 2015).

To address the growing debt burden, governments around the world agreed to the Heavily Indebted Poor countries (HIPC) debt initiative developed by World Bank and the International Monetary Fund (IMF). The initiative was intended to build on existing debt relief efforts and bring together all of a country’s creditors to provide debt relief in conjunction with policy reforms to allow countries to exit from the debt crisis (World Bank, 2018).

Multilateral and bilateral creditors reviewed their lending policies to low-income countries, especially to Africa by stipulating that further loan disbursement will be based only on economic reforms in the context of structural adjustment and Economic Recovery programmes. These intervention programmes failed woefully to deliver the promised growth and development in many African countries due to heavy debt-service obligations (World Bank, 2018).

Africa’s large accumulated debt stock is thwarting the region’s prospects and efforts in achieving increased saving and investment, which consequently dwindles economic growth and poverty reduction. The debt overhang of the region has affected public investment in both physical and social infrastructure due to the massive outflow of resources in debt-service payment. Similarly, it has inhibited private investment, since private investors are scared of policy distortions in environments marred by severe external imbalances and fluctuating exchange rates. By investing less in public health, social infrastructure and human resource development, implies that the external debt burden has compromised some of the essential conditions for sustainable economic growth and poverty reduction.

Although government’s borrowing from the domestic capital market has lesser potential of creating debt crisis, as it is believed to create positive externality in the domestic capital market and prevents capital outflow, most developing countries nonetheless prefer external borrowing to the domestic one (Agbemavor, 2015). In developing countries therefore, external debt constitutes the greater part of the public debt structure (Ijirshar, Fefa and Godoo, 2016) and the choice of external debt over domestic debt could be rationalized based on the following reasons:

First, the over-reliance on domestic borrowing can lead to financial instability and crowd out the private sector (Panizza, and Presbitero, 2013).

Secondly, huge domestic debt may put pressure on the financial institutions jeopardizing the financial stability of the domestic economy.

Thirdly, managers of an economy can easily use debt relief initiatives to address external debt

burden which is non-existent with domestic debt.

 

Several other factors contribute to the growth of external debt.  Ajayi and Edewusi (2020) classified the causes of external debt into external and internal factors. External factors include the cumulative effect of world price shocks which creates fiscal imbalance requiring huge borrowing to fill the fiscal gap, worsening terms of trade and liberal lending policy of international banks. Internal factors are attributed to excessive monetary expansion which causes inflation, over-valued exchange rate and poor management of public projects. Other factors which contribute to swift increases in the external debt stock include, increase in interest rate payable on loan, debt accumulation, volatility in exchange rates, absence of institutional checks on government borrowing and spending, and corrupt leadership (Ekor, Orekoya, Musa, and Damisah,2021;Ajayi and Edewusi 2020).

External debt may promote economic growth when the borrowed funds are invested in sustainable projects that generate revenue for servicing of the debt.  External debt accumulation therefore does not imply slow economic growth but rather the lack of information on the nature, structure, and the magnitude of the debt coupled with inability to meet the debt obligation that impedes growth (Ekor, et al, 2021).

 

It is now generally believed that a lasting solution to the external debt problem in Sub- Saharan Africa is to double official aid inflow and open western markets for the debtor countries to freely buy and sell, so that they can attain sustainable growth and development and to meet the development challenges facing the region, particularly that of reducing poverty by 2025. Moreover, the agricultural and industrial sectors of their economies need to be protected as well as encouraged to boost exports, which is their main foreign exchange earner. To achieve the Millennium Development Goals, Sub- Saharan Africa would need to generate a growth rate of at least 7 to 8 percent per annum and sustain this growth for not less than a decade (Sachs, Traub-Schruidt, Kroll, Lafortune, and Fuller, 2021).

 

1.2  STATEMENT OF  THE PROBLEM

The external debt crisis of the third world, and indeed Sub-Saharan Africa has imposed enormous costs on the debtor countries, most notably, low economic growth and crowding out of private investment (Mhlaba and Phiri (2019).

Although a substantial proportion of Sub-Sahara Africa debts are development-related, the ability to service them does not only depend on growth and development in the debtor countries, but also on a healthy and expanding world economy (Sachs et al, 2021, Abbott, 1993). However, the presumed growth and development did not take place, instead the development loans retarded it by depleting an increasing share of their limited foreign exchange resources for debt-service payments. This problem was further aggravated by the large number of bogus projects and over ambitious development plans which negatively affected the development effort in the region (Ahlborn and Schweickert, 2016).

In spite of the economic reforms such as the Structural Adjustment Programmes (SAP), adopted by Nigeria and Ghana, and Economic Recovery Program (ERP) pursued by South Africa since mid-1980s, the region recorded only modest growth with successive levels of high inflation and unsustainable balance of payment deficits. Moreover, Sub-Saharan Africa continues to experience worsening economic conditions that encouraged high levels of foreign borrowing. Since the inception of the crisis, the growth performance has been very disappointing due mostly to the increased outflow of resources in debt service payments. The acquired loans appeared not to have yield a rate of return higher than the cost of borrowing to repay the debt. Moreover, the region’s economies have had a history of debt-servicing difficulties due to insufficient domestic resources. This was evidenced by the fact that on several occasions the countries were in debt-service arrears (World Bank, 2018).

 

Notwithstanding previous debt relief, rescheduling and restructuring initiatives, Sub-Saharan Africa’s debt problems and economic situation seem to have remained fragile. The high external debt-service has depleted the savings and foreign exchange earnings that could have been used in domestic investments and in the provision of social services for the growing population. In addition, the region’s mounting debt stocks have discouraged the inflow of foreign resources in the form of foreign direct investment for fear of high taxation rates and macroeconomic policy distortions. Instead of attracting resources from abroad, domestic resources flee to the developed nations either for safe keeping or for investment (Idris and Ahmad, 2017).

Accordingly, this work is undertaken to assess both the short term and long term implications of mounting debt burden on the economies of Nigeria, Ghana and South Africa.

Again, there have been concerns among policy makers that the rapid increase in public debt has the potential of eroding a country’s sovereign rating, particularly if it is not supported by proportionate growth in the economy (Budiman and Desilver, 2017).

 

Numerous studies have been done with regard to the impact of Public debt on economic growth of Nigeria, Ghana and South Africa. Ajayi and Edewusi (2020) found that External debt exerted negative long-run and short - run effect on economic growth of Nigeria while Domestic debt exerted positive long – run and short – run effect on economic growth of Nigeria. In Ghana, Erickson and Owusu-Nantwi (2016) discovered a positive and significant long- run relationship between public debt and economic growth. In the short run, however, they argued that there was a bi-directional relationship between the level of growth in the economy and public debt. Mhlaba and Phiri (2019) examined the impact of public debt on economic growth in South Africa. The study supported a negative relationship between public debt and economic growth, irrespective of whether the analysis was in the short or long run.

Some studies found the accumulation of public debt and repayment costs as growth inhibiting (Ajayi and Edewusi, 2020; Said and Yusuf, 2018; Favour, Ideniyi, Oge and Charity, 2017; Dada, 2012) while others found that debt- financed expansionary fiscal policies positively affect economic growth (Ude, Ugwu and Onwuka, 2016; Bakare, Ogunlana, Adeyeye and Mudashiru, 2016) though they did not carry out a comparative study.

 

The lack of consensus surrounding the outcomes of public debt burden on economic growth with most of the studies about the same country or geographical area, is related to the methodological differences and also the nature of the data employed, which are generally very diverse and often contradictory. These variations suggest an ensuing controversy in the literature about growth and government debt relationship. There is the need for a further empirical investigation into the subject matter. Consequently, this study is intended to add to existing literature in providing new empirical evidence on the impact of Public debt burden on the economic growth of Nigeria, Ghana and South Africa.

 

1.3       OBJECTIVES OF THE STUDY

The broad objective of this study is to assess the effect of Public debt burden on economic growth in Nigeria, Ghana and South Africa. The specific objectives are to;

      i.         Ascertain the effect of aggregate Public debt burden on economic growth in Nigeria, Ghana and South Africa;

     ii.         Examine the impact of External debt burden  on economic growth in Nigeria, Ghana and South Africa;

   iii.          Determine the effect of Domestic debt burden  on economic growth in Nigeria, Ghana and South Africa;

   iv.         Determine the impact of public debt service on economic growth in Nigeria, Ghana and South Africa.;

     v.         Examine the impact of public debt burden for infrastructural development on economic growth of Nigeria, Ghana and South Africa; and

   vi.         Evaluate the impact of public debt burden for recurrent expenditure on economic growth in Nigeria, Ghana and South Africa.

 

  1.4     RESEARCH QUESTIONS

    The following research questions have been formulated to guide the study

      i.         To what extent does aggregate public debt burden affect economic growth in Nigeria, Ghana and South Africa?

     ii.         In what way does External debt burden affect economic growth in Nigeria, Ghana and South Africa?

   iii.           In what way does Domestic debt burden affect economic growth in Nigeria, Ghana and South Africa?

   iv.         To what extent does Public debt service impact on economic growth in Nigeria, Ghana and South Africa?

     v.          How does public debt burden for infrastructural development impact on economic growth in Nigeria, Ghana and South Africa?

   vi.         To what extent does Public debt burden for recurrent expenditure impact on economic growth in Nigeria, Ghana and South Africa?

 

1.5 RESEARCH HYPOTHESES

In the effort to examine the effects of Public debt burden on economic growth of Nigeria, Ghana and South Africa, the following null hypotheses have been tested in this study;

H01:    Aggregate Public debt burden has no significant impact on economic growth in Nigeria, Ghana   and South Africa.

H02:       External debt burden does not have significant effect on the economic growth of Nigeria, Ghana and South Africa.

H03:       Domestic debt burden does not have significant effect on the economic growth of Nigeria, Ghana and South Africa.

 

H04:       Public debt service does not have significant impact on the economic growth of Nigeria, Ghana and South Africa in the short and long- run.

H05:     Public debt for infrastructural development does not have significant impact on economic growth in Nigeria, Ghana and South Africa, 

H06:       Public debt for recurrent expenditure has no significant impact on economic growth in Nigeria, Ghana and South Africa.

 

1.6   SCOPE OF THE STUDY

Government debt continues to be a critical economic policy issue, which largely affects both developed and developing countries, due to elevated level of debt. From a general viewpoint, government debt is a crucial feature of a country's financial system and a major indicator that contributes to the formation of a country's reputation in the international market.

This work investigates the impact of Public debt burden on economic growth in Nigeria, Ghana and South Africa. The study employed time-series data and will be limited to the period 1981 to 2021. Basically, Sub-Saharan African (SSA) nations began to experience debt problem from the early 1980s when foreign exchange earnings plummeted as a result of the collapse of prices in the international oil market and external loans began to be acquired indiscriminately (Ukwuoma and Imandojemu, 2019). The debt crisis, which is the combination of accumulated debt stock and difficulty servicing those loans, has imposed several burdens on the emerging economies of Nigeria, Ghana and South Africa.

This is reflected in the fall in real growth rates, investment rate and export earnings since 1980s till date, hence the choice of this period for the study. Again, Nigeria, Ghana and South Africa have been chosen for comparative study because whilst Nigeria and South Africa are the top two largest countries in SSA, Ghana is the fastest growing economy within the SSA region.

 

1.7   LIMITATIONS OF THE STUDY

The researcher encountered some challenges sourcing data from the various national debt offices and apex banks of the three economies being studied for conducting comparative empirical analysis. It was also observed in the course of the study that the data from the national debt offices and apex banks of these three economies were in their national currencies and therefore posed a problem of currency conversion.  However, to overcome these problems, the researcher painstakingly collected information from the World Bank, International Monetary Fund and other reputable International Financial organizations/ agencies.

 

 1.8 SIGNIFICANCE OF THE STUDY

The study complements existing and yet to be published studies on the link between Public debt and macroeconomic stability in developing and less-developed economies, as little research is undertaken to achieve a conclusive outcome. The outcome of the study will benefit the following categories of stakeholders:

i)               The three tiers of government and regulatory agencies will be guided on how to continue to improve in public finance management policies especially keeping public debt levels within sustainable levels.

ii)             Policymakers are provided with empirical basis that will guide them in making appropriate decisions on whether the government should continue to rely on debts

or resort to some other instruments of fiscal policy measures like additional taxes, reduction of public expenditures, etc. to stimulate economic growth.

iii)           The study will also be useful to international development partners and donors to better appreciate public debt and growth nexus for control and regulation purposes in order to minimize any adverse effect that may accompany public external debt in Nigeria, South Africa and Ghana.

iv)            Finally the general public stands to benefit as the study x-rays the effort of successive government in utilizing borrowed funds to stimulating economic growth or otherwise.

 

 

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