SOURCE:

Faculty: Management Sciences
Department: Banking And Finance

CONTRIBUTORS:

Nduka, A. J.
Ibenta, S. N. O.

ABSTRACT:

The study was set out to examine effect of public debt on economic growth of selectedSub-Saharan African countries of Angola, Kenya, Nigeria and South Africafrom 1986 to 2015. The objective of the study is to analyze the growth effects of the following selected variables on the economies of these countries: domestic debt, domestic debt service, external debt and external debt service.This study is guided by the neoclassical economic and Keynesian growth theory. Secondary data were sourced from the World Bank’s Development Indicator (WDI) online Database.Econometric techniques involving the panel data analysis was adopted. The Hausman specification test was used to select the panel random-effects model for the study at 5% significance level. Further analysis of the effect of the variables on economic growth reveals divergent results. The study found that domestic debt stock (DOM)positively affect economic growth in Angola and Kenya but negatively affects economic growth in Nigeria, while on the other hand; domestic debt was found to have no significant positive effect on economic growth in South Africa. Results reveal that domesticdebt services(DOMSERV) show positive effecton economic growth in Angola and South Africa, but negatively affect economic growth inKenya and Nigeria. The study found that external debt (EXDS)positively affectseconomic growth inAngola and Kenya, but negatively affect economic growth in Nigeria and South Africa. The study also found that external debt services(EXDSERV) significantly andnegatively affect economic growth in Angola, Kenya and Nigeria, butshow positive effecton economic growth in South Africa. Based on the findings, the study concludes that domestic debt and external debt are important determinants of economic growth in the selected sub-Saharan African Countries. In view of this, the study recommends that governments of the selected sub-Saharan African countries should encourage only sustainable domestic and external borrowing that are developmental project-tide, utilize the funds in productive economic activities and discourage delay in servicing their debt to avoid huge accumulation. The studycontributes to knowledge by modifying some models used in previous studies such as Obademi (2012) and Kasidi & Said (2013) as well as extending the period of study to 2015.