An Investigation of Policy Reforms’ Impact on National Debt Sustainability in Nigeria
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Background of the Study
National debt sustainability is critical for ensuring long-term economic stability, as excessive debt levels can lead to fiscal crises and constrain future policy space. In Nigeria, recurrent fiscal deficits and high public debt have raised concerns about the sustainability of government borrowing practices. Policy reforms aimed at improving fiscal discipline—including expenditure rationalization, tax reforms, and improved debt management—are designed to stabilize and reduce the debt burden (Owolabi, 2023). These reforms seek to align government spending with revenue generation, enhance transparency, and foster investor confidence. The effectiveness of such reforms in achieving debt sustainability is of paramount interest to policymakers and economists. This study examines the impact of policy reforms on Nigeria’s national debt sustainability by analyzing trends in fiscal deficits, debt-to-GDP ratios, and interest payment burdens before and after reform implementation. Utilizing econometric techniques and policy analysis, the research aims to quantify the effect of reforms on debt dynamics and identify the key factors that facilitate or hinder sustainable debt management (Owolabi, 2023; Chinwe, 2024).
Statement of the Problem
Nigeria’s public debt levels have remained a persistent concern despite various policy reforms intended to promote fiscal discipline. Although reforms have been introduced to curb fiscal deficits and improve debt management, their effectiveness in reducing the debt burden is still under debate. Structural challenges such as inefficient public expenditure, revenue shortfalls, and weak institutional frameworks continue to compromise the sustainability of public debt (Owolabi, 2023). Additionally, external economic shocks and fluctuations in global financial markets exacerbate debt dynamics, further complicating the fiscal environment. The lack of comprehensive evidence on the causal relationship between policy reforms and debt sustainability creates uncertainty among policymakers and investors. This study seeks to investigate how recent policy reforms have influenced national debt sustainability in Nigeria, identifying the reform measures that have been most effective and diagnosing the persistent obstacles that prevent optimal debt management.
Objectives of the Study
- To evaluate the impact of fiscal policy reforms on national debt sustainability.
- To identify the institutional and structural barriers to effective debt management.
- To recommend strategies for enhancing the sustainability of Nigeria’s public debt.
Research Questions
- How have policy reforms affected Nigeria’s debt-to-GDP ratio?
- What factors hinder the effectiveness of debt management reforms?
- Which reforms are most effective in promoting long-term debt sustainability?
Research Hypotheses
- H1: Fiscal policy reforms significantly improve debt sustainability.
- H2: Institutional weaknesses reduce the effectiveness of debt management reforms.
- H3: Enhanced revenue mobilization is positively correlated with improved debt sustainability.
Scope and Limitations of the Study
The study uses fiscal and debt data from Nigeria over the past decade. Limitations include external economic shocks and difficulties in isolating reform effects from other fiscal variables.
Definitions of Terms
• Policy Reforms: Government measures aimed at improving fiscal management.
• National Debt Sustainability: The ability of a country to maintain its debt at manageable levels.
• Debt-to-GDP Ratio: A measure of a country’s debt relative to its economic output.
• Fiscal Deficit: The shortfall when government spending exceeds revenue.
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