Fiscal sustainability and debt management (1986-2025)

Nigeria's fiscal landscape has undergone dramatic transformations over the past four decades, oscillating between periods of relative stability and episodes of acute vulnerability driven by commodity price shocks, governance failures, and structural economic weaknesses. This paper examines the determinants of fiscal sustainability and debt management in Nigeria over the period 1986 to 2025, employing a time series regression framework. The dependent variable, the debt-to-GDP ratio, serves as the primary indicator of fiscal sustainability, while the independent variables include GDP growth rate (macroeconomic factor), government revenue (fiscal factor), government expenditure disaggregated into capital and recurrent components, external debt stock (debt-related factor), and fiscal rules (institutional factor). Drawing on data from the Central Bank of Nigeria Statistical Bulletin, the Debt Management Office, the National Bureau of Statistics, and the World Bank's World Development Indicators, the study employs Ordinary Least Squares (OLS) regression augmented with post-estimation diagnostic checks including tests for stationarity, serial correlation, heteroscedasticity, multicollinearity, and model specification. The findings reveal that GDP growth rate and government revenue exert significant negative effects on the debt-to-GDP ratio, suggesting that stronger economic performance and improved revenue mobilisation enhance fiscal sustainability. Recurrent expenditure and external debt stock exhibit significant positive relationships with the debt-to-GDP ratio, indicating that rising consumption spending and external borrowing worsen fiscal sustainability. Capital expenditure shows a negative but statistically weak relationship, while the presence of fiscal rules demonstrates a modest dampening effect on debt accumulation. The study contributes to the literature by integrating institutional variables into the fiscal sustainability discourse within the Nigerian context, offering a more comprehensive analytical framework than prior studies. The paper concludes with actionable policy recommendations centred on revenue diversification, expenditure rationalisation, strategic debt management, and institutional strengthening.