ASSESSING THE IMPACT OF INSTITUTIONAL QUALITY ON PUBLIC DEBT SUSTAINABILITY IN NIGERIA
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Abstract
Nigeria's public debt crisis is marked by escalating debt levels, driven by ongoing budget deficits and a heavy dependence on borrowing to fund government expenditure. The resulting high debt servicing costs, compounded by revenue shortfalls and external economic shocks, pose substantial fiscal risks and limit investments in essential infrastructure and social development initiatives. Consequently, this study examines the threshold effects of rule of law and corruption on public debt sustainability in Nigeria, utilizing annual data from 1993 to 2022 and employing a threshold regression methodology for analysis. The study's results show that when corruption exceeds a certain level, it has a substantial positive effect on public debt, indicating that corruption worsens the nation's debt burden. Furthermore, the findings indicate that a more robust rule of law is linked to lower public debt levels, underscoring the crucial role of institutional quality in effective fiscal management Based on the study's findings, several recommendations are proposed to ensure sustainable fiscal management and good governance. These include: intensifying anti-corruption measures, strengthening the rule of law, enforcing fiscal discipline, expanding revenue sources, developing institutional capabilities, and engaging citizens through awareness and participation initiatives.
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