EFFECT OF BUDGET DEFICIT AND PUBLIC DEBT SERVICING ON DOMESTIC DEBT STOCK IN NIGERIA

This study examines the effect of budget deficit and public debt servicing on domestic debt stock in Nigeria. An ex-post facto research design was employed for this study. Secondary data were collected from Central Bank of Nigeria Statistical Bulletin for thirty eight year period spanning through 1981 to 2018. Employing the econometric methodology of the Johansen Cointegration and Vector Error Correction Model, the study established long run relationships among the variables. The Ordinary Least Square result shows that budget deficit has no significant effect on domestic debt stock in Nigeria, while domestic debt servicing have significant effect on domestic debt stock in Nigeria. The study recommends that the Debt Management Office should take urgent steps towards restructuring part of the short term domestic debt to long term through outright redemption of portion of short term domestic debt when they mature. Also, to reduce the possibility of crowding-out the private sector, the Federal Government should encourage private sector participation in developmental projects through the issuance of Federal Government guarantee.