Fiscal Pressures and Public Investment: A Study of Public Debt Sustainability and Capital Expenditure in Nigeria

This study investigates the effect of public debt sustainability on capital expenditure in Nigeria, examining the relationship between selected fiscal indicators and government investment over a 33-year period (1990–2022). Guided by concerns about rising debt levels and their implications for economic development, the research adopts an ex-post facto design, utilizing validated secondary data extracted from the Central Bank of Nigeria’s statistical bulletins.

The study’s population comprises aggregate national fiscal records, including data on public debt, GDP, government revenue, borrowing, and capital expenditure—treated as macroeconomic proxies for understanding fiscal behavior. Using descriptive statistics, correlation analysis, and multiple regression via the Ordinary Least Squares (OLS) technique, the study evaluates the impact of debt indicators on capital expenditure.

The regression model confirms that Public Debt to Total Government Borrowing (PTGB) has a positive and statistically significant effect on capital expenditure, suggesting that increased borrowing facilitates public investment. Conversely, Public Debt to GDP Ratio (PGDP) demonstrates a negative and significant impact, implying that excessive debt relative to GDP constrains government spending. Other variables—Public Debt to Government Revenue (PGRN) and Debt Servicing Obligation Ratio (DSOR)—were not statistically significant. The model achieved an R² of 0.542, indicating moderate predictive strength.

Based on these findings, the study recommends the implementation of a strategic debt management framework, improvement in revenue mobilization, and stronger oversight mechanisms to ensure that debt financing is effectively linked to productive and sustainable capital investments.