Spending and Public Debt Nexus in Nigeria: The Role of External Reserves

Abstract

Despite the numerous studies on military spending and external debt, almost none of the researchers focus on the impact of defense spending and external reserves on public debt, particularly in Nigeria.The paper used Autoregressive Distributed Lag (ARDL) technique to study the relationship between spending and public debt from 1980-2019 in Nigeria. Also, the authors examine the role of external reserves in the country. The findings reveal that a cointegration exists between the military
expenditure, public debt and external reserves. Furthermore, the outcomes show that both military expenditure and external reserves have a significant and negative effect on public debt in the long run. Based on the empirical results, the article suggests that: government should take appropriate steps to increase military expenditure in order to reduce rising debt in Nigeria. Also, government should provide measures that raise external reserves in Nigeria.