Abstract This study aims to examine the tripartite interplay between economic growth, exchange rate fluctuations, and institutional quality on public debt accumulation in Nigeria over the period 1986-2023. The motivation stems from Nigeria's alarming public debt trajectory, which surged from NGN 12.6 trillion in 2015 to over NGN 97.3 trillion by 2023, despite periods of favorable economic growth. Using an annual time-series research design, this study employs the Auto-Regressive Distributed Lag (ARDL) bounds testing approach for cointegration and mediation analysis within an error correction framework. The preliminary conceptual framework suggests that economic growth exerts a negative effect on public debt, while exchange rate depreciation exhibits a positive and significant impact. Crucially, institutional quality is hypothesized to mediate both relationships: weak institutions amplify the debt-increasing effect of currency depreciation and undermine the debt-reducing potential of economic growth. The findings reveal that the interaction terms (Economic Growth × Institutional Quality and Exchange Rate × Institutional Quality) are statistically significant, indicating that institutional quality fundamentally conditions how macroeconomic fundamentals translate into debt outcomes. Policy recommendations emphasize integrated reforms combining exchange rate stabilization, growth diversification, and institutional strengthening particularly control of corruption and government effectiveness to achieve sustainable public debt management in Africa's largest economy.
DALLAH et al. (Thu,) studied this question.
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