Public debt Domestic debt External debt Investment Gross fixed capital formation GFCF Nigeria Debt management ARDL Autoregressive Distributed Lag Error Correction Model ECM

This study examines the effect of public debt on investment in Nigeria from 1981 to 2023. The study focuses on how domestic and external borrowings influence gross fixed capital formation, which represents investment performance. Annual data were sourced from the Central Bank of Nigeria, Debt Management Office, World Bank, and National Bureau of Statistics. The Autoregressive Distributed Lag (ARDL) and Error Correction Model (ECM) techniques were applied to capture both short-run and long-run relationships among the variables, supported by standard diagnostic tests for reliability and consistency.
The findings reveal that both domestic and external debts exert a negative and significant impact on investment in Nigeria. Inflation, interest rate, and exchange rate volatility were also found to weaken investment performance. The results suggest that rising public debt has not been effectively used to stimulate productive investment, as debt servicing continues to consume a large portion of government revenue. The study recommends prudent borrowing, improved debt management, and channelling of borrowed funds into productive sectors to enhance sustainable investment growth in Nigeria.