Cordelia Onyinyechi Omodero,Dorcas Titilayo Adetula,Kingsley Adeyemo and Folashade Owolabi
This study assesses the role of domestic debt in encouraging economic growth both today and tomorrow. Financial growth promotion without consideration for its future sustenance is a very wasteful financial strategy. Thus this study employs data spanning from 2001 to 2019 with a focus on time relevance. The data collection is on the gross domestic product, domestic debt, interest rate and exchange rate. The study employs the relevant econometric tools and finds that interest rate and exchange rate do not have causality effect on domestic debt. Further findings reveal that household debt has a significant positive impact on economic growth while the interest rate is significantly and negatively influencing the growth. However, the exchange rate does not materially affect growth. The outcome of this study leads to the recommendation that government should be prudent on domestic borrowing to avoid exceeding the tolerable debt limit that will promote and sustain economic expansion in the future. The study further suggests consideration of all economic forces (e.g. interest and exchange rates) by the Central Bank of Nigeria and Debt Management Office when contracting loans.