Title: PUBLIC DEBT AND EXTERNAL RESERVE MANAGEMENT: IMPLICATIONS FOR FINANCIAL EDUCATION IN NIGERIA
Authors:
Michael, Saro S., Phd, Thomas, Bariere, Phd and Ikole Dornubari, Phd
Abstract:
This study examines how domestic debt (DMD), external debt (EXD), and debt service (DSV) jointly influence Nigeria’s external reserves (EXRSV) over 1990–2024. Using annual time series data from the Central Bank of Nigeria and the Debt Management Office, the paper applies the Auto Regressive Distributed Lag (ARDL) estimation technique to identify both long run relationships and short run dynamics. The results revealedthat a stable long run relationship exists between the study variables, with domestic debt having a large and negative long run effect on reserves, while external debt and debt service have positive long run associations, respectively. The error correction term also showed rapid adjustment – about65% of disequilibrium is corrected each year. In the short run, debt service significantly reduces reserves, and lagged domestic debt changes show temporary positive effects. The findings imply that debt composition and servicing schedules matter for reserve adequacy. Thus, policy should limit excessive domestic borrowing; prioritize concessional external finance for productive projects, smooth debt service profiles to protect reserve buffers while broadening financial literacy and education for proper debt and reserve management.
Keywords: Domestic Debt, External Debt, External Reserve Management, and Financial Education.
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