Government Funding and Nigeria’s External Debt Profile

• Post by: airjournals
• December 9, 2025
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Molokwu, I. M. & Ufoaroh, E. T.

ABSTRACT
The study ascertained the relationship between capital expenditures and Nigeria’s external debt profile from 2014 to 2023. The specific objectives include the following: to determine the relationship between capital expenditure on health care and Nigeria’s external debt, to evaluate the relationship between capital expenditure on transport sector and Nigeria’s external debt and to investigate the relationship between capital expenditure on power sector and Nigeria’s external debt. Data for the study were collected from Central Bank of Nigeria (CBN) statistical bulletin, National Bureau of Statistics (NBS) Report and Debt Management Office (DMO). Data were analyzed using correlation analysis model. The result showed that there is a weak positive and non significant relationship between capital expenditure on education and Nigeria’s external debt. With a P-value of 0.517, the test is considered statistically insignificant at 5% level. This could be verified with the coefficient of correlation of 0.249% which indicates that increase in capital expenditure on education weakly increases nation’s external debt by 24.9%. It also revealed that there is an insignificant and weak negative relationship between capital expenditure on transport sector and Nigeria’s external debt. With a P-value of 0.437, the test is considered statistically insignificant at 5% level. This could be verified with the coefficient of correlation of -0.260% which indicates that increase in capital expenditure on agriculture decreases Nigeria’s external debt by -27.8%. It also showed that there is an insignificant and weak negative relationship between capital expenditure on power sector and Nigeria’s external debt. Having shown a P-value of 0.866, the test is considered statistically insignificant at 5% level. This could be verified with the coefficient of correlation of -0.031% which indicates that increase in capital expenditure on health care decreases Nigeria’s external debt by -3.1%. The study recommends among others that government at all levels should only seek external borrowing when vital priority projects are being considered and should equally place a limit on external borrowing.

Keywords: Government Funding; External Debt Profile; Capital Expenditure; Transport Sector