EFFECT OF DEBT SERVICING ON REVENUE RETENTION IN NIGERIA
Abstract
This study examines the effect of debt servicing on public revenue retention in Nigeria, focusing on general loan servicing, World Bank loans, IMF loans, and Paris Club loans between 2000 and 2022. Using an ex-post facto research design, secondary data from the Debt Management Office, Central Bank of Nigeria, and other official sources were analyzed through descriptive statistics, correlation, and robust regression models. The results reveal that general loan servicing significantly reduces public revenue retention, reflecting the heavy fiscal burden imposed by domestic and external debt obligations. Conversely, IMF loans exhibit a significant positive effect, indicating that strategic utilization of such loans can enhance revenue retention despite financing costs. World Bank and Paris Club loans, however, show positive but statistically insignificant impacts, suggesting limited effectiveness in contributing to fiscal capacity. These findings support the crowding-out effect theory, which posits that high debt service payments constrain public investment and economic growth. The study recommends improving debt management practices, prioritizing strategic deployment of IMF loans, and enhancing fiscal accountability to optimize the benefits of borrowed funds and mitigate the adverse effects of excessive debt servicing. This research contributes to understanding the nuanced impact of different debt instruments on Nigeria’s fiscal sustainability, providing policy insights for government debt and revenue management strategies.
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Published in UNIPORT JOURNAL OF BUSINESS, ACCOUNTING & FINANCE MANAGEMENT
ISSN: 1596-9911
This article appears in our peer-reviewed academic journal
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