Analysis of Debt Sustainability in Nigeria: Present Value Budget Constraint (PVBC) Approach
The recent re-accumulation of debt in Highly Indebted Poor Countries (HIPCs) and Low Income Countries (LICs) is an increasing phenomenon and the need to address the argument for country’s specific peculiarities in the case of Nigeria cannot be over emphasized. This study analysed debt sustainability in Nigeria using the present value budget constraint (PVBC) approach for the period 1986-2015. Secondary data on government revenue and government expenditure were sourced from the Statistical Bulletin of the Central Bank of Nigeria (2016 Edition). Data collected were analysed using Augmented Dickey-Fuller (ADF) and Phillips-Perron (PP) unit root tests and Engle-Granger (1988) cointegration test. The study found that both government revenue and government expenditure were integrated of order one, that is, I(1) series and the Engle-Granger (1988) cointegration test showed the presence of long run relationship between government revenue and government expenditure at 5% critical level which suggest the existence of debt sustainability in Nigeria. The study concluded that there is a possibility of strong debt sustainability in Nigeria.
Debt Sustainability, Unit-Root Test, Cointegration Test
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