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Analysis of Debt Sustainability in Nigeria: Present Value Budget Constraint (PVBC) Approach
Current Issue
Volume 6, 2018
Issue 2 (June)
Pages: 29-35   |   Vol. 6, No. 2, June 2018   |   Follow on         
Paper in PDF Downloads: 19   Since Jul. 5, 2018 Views: 361   Since Jul. 5, 2018
Authors
[1]
Oladunjoye Opeyemi Nathaniel, Department of Economics, Obafemi Awolowo University, Ile-Ife, Nigeria.
[2]
Yunusa Dauda Olalekan, Department of Economics, Obafemi Awolowo University, Ile-Ife, Nigeria.
Abstract
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.
Keywords
Debt Sustainability, Unit-Root Test, Cointegration Test
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