GOVERNMENT BORROWING AND ECONOMIC DEVELOPMENT FROM 2015-2021: A CASE STUDY OF

AKWA IBOM STATE

A RESEARCH PROJECT

BY

MOSES, NSIKAK MANOAH

AK18/MGT/PAD/036

SUBMITTED TO

DEPARTMENT OF PUBLIC ADMINISTRATION

FACULTY OF MANAGEMENT SCIENCE
AKWA IBOM STATE UNIVERSITY
OBIO AKPA CAMPUS

1
 MAY, 2023
GOVERNMENT BORROWING AND ECONOMIC DEVELOPMENT FROM 2015-2021: A CASE STUDY OF
AKWA IBOM STATE

A RESEARCH PROJECT

BY

MOSES, NSIKAK MANOAH

AK18/MGT/PAD/036

SUBMITTED TO

DEPARTMENT OF PUBLIC ADMINISTRATION

FACULTY OF MANAGEMENT SCIENCE
AKWA IBOM STATE UNIVERSITY
OBIO AKPA CAMPUS

2
 IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE AWARD OF BACHELOR OF SCIENCE ([Link])
DEGREE IN PUBLIC ADMINISTRATION

MAY, 2023
DECLARATION

I hereby declare that this research project titled “Government Borrowing and Economic Development

from 2015-2021: A Case Study of Akwa Ibom State” was carried out by me under the supervision of Mr.

Joseph Mark. All the works cited have been duly acknowledged in the reference section of this work.

…………………………………
MOSES, NSIKAK MANOAH
AK18/MGT/PAD/036

3
 CERTIFICATION

This is to certify that the Research Project titled “Government Borrowing and Economic Development

from 2015-2021: A Case Study of Akwa State” was carried out by MOSES, NSIKAK MANOAH with the

Registration Number: AK18/MGT/PAD/036. It was examined and approved as meeting part of the

requirement of the Department of Public Administration, Faculty of Management Sciences, Akwa Ibom

State University for the Award of the Degree of Bachelor of Science ([Link]) in Public Administration.

…………………… …………………………
Mr. Joseph Mark Date
(Supervisor)

…………………… …………………………
Dr. Imoh Imoh-Ita Date
(Head of Department)

…………………… …………………………
Assoc. Prof. U. Ujim Agbor Date
(External Examiner)

4
 DEDICATION

This work is dedicated to God Almighty, who is the author of Knowledge for granting me the grace to

complete this work.

5
ACKNOWLEDGEMENTS

I would be negated if I fail to acknowledge and give due references to God Almighty and those

who have assisted me in the course of my academic pursuit in University.

My profound and sincere appreciation goes to my wonderful, understanding, and corrective

supervisor, Mr. Joseph Mark for his attention patience, and guidance in the course of this work.

I appreciate my Head of Department, Dr. Imoh Imoh Ita and other lecturers of the Department

namely; Assoc. Prof. Akpanim Ekpe, Assoc. Prof. Dr. Enefiok Ibok, Dr. Ofonmbuk Atakpa, Dr. Sunday

Ibanga, Dr. Ekong Daniel, Dr. Unwana-Abasi, Dr. Nnamso Mbom, Dr. Ekaette, Mr. Emmanuel Ndaeyo, Dr.

Atairet Clifford, Mr. Ekan Akpan and other staffs in the Department for their impartation of knowledge

unto me.

My heartfelt appreciation also goes to my loving parents Mr/Mrs Manoah Moses for their

financial support throughout duration of my studies. Not left out is my uncle, Mr. Effiong Nedd who has

been there for me. God bless you. I appreciate my beloved brothers and sisters Moses Manoah, Blessing

Manoah, Glory Manoah and Samuel Manoah for their show of love and concern towards me.

I also acknowledge Happiness Ekerette Essien for her great support and contribution towards

my success in this project work and also Akwa Ibom State University at large.

Most especially, my friends and course mates who are like brothers and sisters, Daniel Ukofia,

Nyakno Okon, Love Daniel, Esther Thompson, Jessica Okon, Udeme Mbaba, Solomon Udoma, Philomena

Ezekiel and Daniel Mark who have been there for me.

6
 A sincere appreciation to Gift Nathaniel who has helped in the typing of this manuscript. I say

thanks to you all.

ABSTRACT

Government borrowing is usually considered a critical tool for government to fund public spending,
particularly to finance infrastructure development, which is very important in fast tracking economic
development. The major objective of the study was to assess the role of government borrowing
economic development, particularly in Akwa Ibom State. The study adopted survey research design
methodology, while Neo-classical development theory was used as the theoretical guide for the study.
Primary and secondary sources of data were four hundred (400) respondents who were randomly
selected from the population. Three hundred and forty nine (349) copies of questionnaire were
successfully retrieved and used in the regression analysis. Findings revealed that government
borrowings affected the economic development of Akwa Ibom State positively and negatively. On the
positive side, government borrowing led to a significant increase in economic development which had
been a problem in Akwa Ibom State. Infrastructures and good roads networks has increased in the state.
The study recommends that the state house of Assembly should grant approval of loan applications by
government to enhance economic and social development, the loan obtained by the State Government
should be strictly utilize for the purpose such loans were meant for, government should reduce the rate
of external borrowing, in order to reduce high interest rate and high debt and government should make
policy that will help generate revenue for the repayment of government loans.

7
 TABLE OF CONTENTS

Title Page - - - - - - - - - - i

Declaration - - - - - - - - - - ii

Certification - - - - - - - - - - iii

Dedication - - - - - - - - - - iv

Acknowledgements - - - - - - - - - v

Abstract - - - - - - - - - - vi

Table of Contents - - - - - - - - - vii

List of Tables - - - - - - - - - - viii

CHAPTER ONE: INTRODUCTION

1.1 Background of the Study - - - - - - - 1

1.2 Statement of the Problem - - - - - - - 3
1.3 Objectives of the Study - - - - - - - 5
1.4 Research Question - - - - - - - - 5
1.5 Research Hypothesis - - - - - - - - 5
1.6 Significance of the Study - - - - - - - 6
1.7 Scope and Limitation of the Study - - - - - - 6
1.8 Definition of Term - - - - - - - - 7
CHAPTER TWO: LITERATURE REVIEW AND THEORETICAL FRAMEWORK

2.1 General Literature - - - - - - - - 9

2.1.1 The Concept of Government Borrowing - - - - - -9
2.1.2 Economic Development - - - - - - - 16
2.2 Empirical Review - - - - - - - - 18
2.3 Case Study Literature - - - - - - - - 23

8
2.4 Theoretical Review - - - - - - - - 25
2.4.1 Neo-Classical Development Theory - - - - - - 26
2.5 Knowledge Gap - - - - - - - - 28
CHAPTER THREE: METHODOLOGY
3.1 Introduction - - - - - - - - - 29
3.2 Research Design - - - - - - - - 29
3.3 Population of the Study - - - - - - - 29
3.4 Sample and Sampling Technique - - - - - - 30
3.5 Instrumentation - - - - - - - - 31
3.6 Validation of Instrument - - - - - - - 31
3.7 Method of Data Collection - - - - - - - 31
3.8 Method of Data Analysis - - - - - - - 32
3.9 Model Specification - - - - - - - - 32
CHAPTER FOUR: DATA PRESENTATION ANALYSIS AND DISCUSSION OF FINDINGS
4.0 Introduction - - - - - - - - - 34
4.1 Data Presentation - - - - - - - - 34
4.1.1 Analysis of Questionaire- - - - - - - 34
4.1.2 Gender Distribution of the Respondent - - - - - 35
4.1.3 Age Distribution of the Respondent - - - - - - 35
4.1.4 Test for Reliability and Validity - - - - - - 36
4.1.5 Normality Test - - - - - - - - 37
4.2 Data Analyses - - - - - - - - - 38
4.2.1 Correlation Analysis - - - - - - - - 38
4.2.2 Regression Analysis - - - - - - - - 39
[Link] Test of Munlticollinearity - - - - - - - 40
[Link] Test for Heteroscedasticity - - - - - - - 41
4.3 Test of Hypotheses - - - - - - - - 41
4.4 Discussion of Results - - - - - - - - 43
CHAPTER FIVE: SUMMARY CONCLUSION AND RECOMMENDATIONS
5.1 Summary of Findings - - - - - - - - 45
5.2 Conclusion - - - - - - - - - 45
5.3 Recommendations - - - - - - - - 46
5.4 Contribution to Knowledge - - - - - - - 47

9
5.5 Suggestion of further studies - - - - - - - 47
References - - - - - - - - - - 48
Appendices - - - - - - - - - - 52

LIST OF TABLES
Table 1:Analysis of Questionnaire - - - - - - 34
Table 2:Gender Distribution of Respondents - - - - - 35
Table 3:Ages Distribution of the Respondents - - - - 35
Table 4:Test for Reliability - - - - - - - 36
Table 5:Test of Data Normally - - - - - - 37
Table 6:Correlation Analysis - - - - - - - 39
Table 7:Regression Result - - - - - - - 40

10
 CHAPTER ONE

INTRODUCTION

1.1 Background to the Study

When government revenues fall short of its expenditure, governments borrow.

Governments borrowings are thus a critical tool for governments to fund public spending,

particularly when it is difficult to raise taxes and reduce public expenditure. Over the years, this

process has left most governments with massive outstanding debts. Reasonable borrowings to

finance public and infrastructure development are the key to faster economic growth. But excess

borrowings without appropriate planning for investment may lead to heavy debt burden and

interest payment, which in turn may create several undesirable effects for the economy (Joy &

Panda, 2020). For countries with poor economic structure, high public debt is also a critical issue

since it can create uncertainty and low economic growth. High debt-to-GDP ratios are also

considered a concern for investors, as they can have a negative effect on the stock market and

reduce productive investment and employment in the long-run (Saungweme, 2019).

Governments borrowing, therefore, may be an economic stimulant but when its accumulation

gets to a very substantial level, a reasonable proportion of government expenditure and foreign

exchange earnings will be used to service and repay the debt with a heavy opportunity costs even

for future generations. Moreover, the cost of debt servicing can increase beyond the capacity of

the economy to cope, adversely affecting the efforts to address the desired fiscal and monetary

policy objectives. In addition, rising excessive government borrowing can restrict the

government’s ability to pursue more productive investment programmes in infrastructure,

education and public health (Johnny & Johnny walker, 2018). The justification for government

borrowing has its foundation in the neoclassical growth models, which prescribes the need for

11
capital scarce countries to borrow to increase their capital accumulation and steady-state level of

output per capita (Madow, 2021). The occurrence of global economic crises has provided further

impetus for countries (especially the developing ones) to borrow as they are often confronted

with the need for increased expenditure levels and declining capital inflows (Ogbonna, 2019).

Conventional view suggests that government borrowing has a positive effect on economic

development in the short-run by stimulating aggregate demand and output.

Government borrowing can influence the economy of a state in particular and a nation at

large either positively or negatively. The negative effect of government borrowing is captured by

the debt burden, the debt overhang and debt crowding out effect. However, the positive effect of

government borrowing on economic development has been built on the premises that even if

government borrowing is inconsequential in the savings and investment function, it can still

influence output growth through its effects on factor productivity and growth mix. Therefore, it

becomes pertinent that we strike a balance in the volume of government borrowing. This is

because there is an optimal level of borrowing that can throttle growth, beyond which leads to

economic retardation.

Given that the objectives of increases in government borrowing is to stimulate economic

development, this huge increase in government borrowing is expected to generate a

corresponding increase in economic growth in Akwa Ibom State, unfortunately, increases in

government borrowing has not been able to generate a meaningful growth in Akwa Ibom State,

Nigeria. The study therefore seeks to investigate the impact of government borrowing on

economic development in Akwa Ibom State.

12
According to Paito (2012), deficit is financed through borrowings (domestically or foreign) or

use of foreign reserve to settle the deficit. Patio (2012) further posits that by borrowing, it means

that the government has to agree on the terms of payments which usually are attached with

strange regulations. Hence, this will perpetrate the deficit as more money will be spent by

government on servicing the debts which creates more expenditure and deficit. He argues that

persistence of this may result in high and variable inflation, debt crises with crowding out of

investment and growth coupled with macro-economic imbalance in general. However, it has also

been said that there is nothing intrinsically wrong in obtaining loan whether foreign or domestic,

provided such funds are invested appropriately in creating wealth and improving the quality of

lives of the people. In the same vein, opinion stands divided as per the actual role of government

borrowing in Akwa Ibom State. While some individuals see it as beneficial, others are of the

view that government borrowing may has failed or not to produce the desired economic benefits,

being characterized by strange terms, occasioning high interest payments and unpalatable debts

service agreements. Coupled with this is the perceived high incidence of corruption among

government officials who allegedly connive with some of the lender agencies to defraud Akwa

Ibom State of billions of naira.

1.2 Statement of the Problem

A nation's road to economic growth and development is hampered by an increasing government

borrowing. The cost of servicing the debt when rise beyond the economy's ability to cope will

pose a threat to the country's ability to meet its fiscal and monetary policy goals. (Soludo, 2003).

Huge external borrowings does not necessarily imply a slow economic development; it is a

nation‘s inability to meet its borrowing service payments fueled by inadequate knowledge on the

nature, structure and magnitude of the borrowing in question (Were, 2011). It is no exaggeration

13
that this is the major challenge faced by the Nigerian economy. The inability of the Nigerian

economy to effectively meet its borrowing servicing requirements has exposed the nation to a

high borrowing service burden. The resultant effect of the debt service burden creates additional

problems for the nation particularly and increasing fiscal deficit which is driven by higher levels

of borrowing servicing.

Akwa Ibom State in particular and Nigeria in general has been caught in a cycle of hasty

and distress borrowing that they are unable to service due to the fall in the price of crude oil.

Therefore, borrowing at a reasonable rate was the right measures to use and fund public and

infrastructure development in the state in other to accelerate economic growth and development.

However, Akwa Ibom state is on excessive borrowing without proper investment planning which

has result in a high debt burden and interest payments, which has a number of negative

consequences for the economy. The state has massive outstanding debts as a result of thisprocess

over the years (Joy and Panda, 2020).Government borrowing is clearly increasing, resulting in a

large debt burden with high servicing costs and a negative impact on the economy and also

causing inflation. Government borrowing has a tremendous impact on the economic

development of the state such as lack of infrastructural development, prompt payment of salaries

and benefits, unfinished contracts and unemployment.

Therefore, this work tends to critically analyze the impact of government borrowing and

economic development in Akwa Ibom State between 2015 -2021.

1.3 Objectives of the Study

14
The aim of this study was to consider if government borrowing and economic development in

Akwa Ibom State will go a long way to add to the existing body of knowledge in the field of

public administration and other relevant fields.

To achieve this aim, the following objectives are set out:

i. To assess the role of the state house of assembly in the approval of government loans.

ii. To investigate how the state government utilise the state loans for economic

development.

iii. To examine the repayment plans of government loans and it's effect on socio-economic

development.

1.4 Research Questions

This section deals with the formulation of the research question that will help to achieve the

objectives of the study. They are:

1. How does the role of the state house of assembly affect the approval of government loans?

2. What are the ways in which the state government uses to utilise the state loans for economic

development?

3. What are the repayment plans of government loans and it's effect on socio-economic

development?

1.5 Research Hypothesis

For the purpose of this research the following hypothesis has been formulated:

H01: There is no significant relationship between the role of the state house of assembly and the

approval of government loans.

15
H02: There is no significant relationship between the state government and utilising the state

loans for economic development.

HO3: There is no significant relationship existing between repayment plans of government loans

and socio-economic development

1.6 Significance of the Study

The case to evaluate Government Borrowing and Economic Development in Akwa Ibom State

has never been stronger, nor the need for action clearer. So, the outcome of the study helps both

administrators and economists on how to manage data and analysis to effectively use

government loans in order to achieve the actual aim of the loans.

Finally, this research will help expand the existing literature regarding the impact of government

borrowing on economic development and will provoke further academic discussion among

administrative researches, economists, management sciences researches on how to generate data

that will be useful on economic development.

1.7 Scope and Limitation of the Study

The subject matter is on Government Borrowing and Economic Development. However, for this

study, the researcher will focus on the effort of Akwa Ibom State government. The work will

also be concerned with what serve as impact of Government Borrowing and Economic

Development in Akwa Ibom State.

So many factors like time serves as a constraint to the work, unavailability of materials related to

the subject matter and unwillingness to respond to research questions by the respondents was

another limitation.

16
1.8 Definition of the Terms

Government Borrowing:

Government borrowing is a loan obtained by the government that is recorded as capital receipts

in the Budget document. It's the total amount of money borrowed by the federal government to

provide government services and benefits.

A country's gross government borrowing is the financial liabilities of the government sector.

Changes in government borrowing over time reflect primarily borrowing due to past government

deficits. A deficit occurs when a government's expenditures exceed revenues. Government

borrowing may be owed to domestic residents, as well as to foreign residents. If owed to foreign

residents, that quantity is included in the country's external borrowing.

Internal borrowing:

Internal borrowing is the component of the total government borrowing in a country that is owed

to lenders within the country. Internal government borrowing is complement is external

government borrowing. The main sources of funds for internal borrowing are commercial banks

and other financial institutions.

External borrowing:

External borrowing is the liabilities that are owed to nonresidents by [Link] debtors can

be governments, corporations or citizens. External borrowing may be denominated in domestic

or foreign currency. It includes amounts owed to private commercial banks, foreign

governments, or international financial institutions such as the International Monetary Fund

(IMF) and the World Bank.

17
Economic Development:

The process of developing wealth for the benefit of a community is known aseconomic

development. It's more than an employment program; it's an investment inyour community's

economic growth and improved wealth and quality of life.

CHAPTER TWO

Review of Related Literature

2.1 General Literature

2.1.1 The Concept of Government borrowing

18
 Government borrowing is one of the means to finance government revenue. When

government expenditure exceeds its receipts, it borrows from the public. Thus, borrowing or

taking loans from the public is called Government borrowing. Government borrowing as a

source of government revenue is different from other sources of public revenue such as taxes,

fees etc. in the case of government borrowing, the government has to pay interest and repay the

principal to the public. But nothing is required to be paid by the government in the case of other

sources of revenue (Jinghan, 2010). Samuelson and Nordhaus (2010) opined that the government

debt (sometimes called the public debt consists of the total or accumulated borrowings by the

government. Njoku (2009) argued that Government borrowing is a debt which a country owes its

citizens or to other countries, or external organizations. Anyanwu (2003) defined Government

borrowing as the debt owned by the nations to the rest of the world. Government borrowings has

been described as one of the major indicators of the macroeconomic variables which forms the

image of countries in the international markets. Generally, it is one of the determinants of foreign

direct investment flows. Prudent management of government borrowings increases economic

development and stability via resources mobilization with low borrowing cost and limited

financial risk exposure (Christabell, 2013). Government borrowings can also be described as the

total debts, loans, borrowings of a country, which include borrowings of governments at all

levels such as local, state and national governments, thereby showing how many public

expenditures are financed through borrowing instead of taxation (Makau, 2008 cited in

Christabell, 2013). Government borrowing is a loan obtained by the government that is recorded

as capital receipts in the Budget document. It's the total amount of money borrowed by the

federal government to provide government services and benefits. Because tax and non-tax

revenue is insufficient to fund the government's spending program, the government announces an

annual borrowing program in the Budget (Economic times, 2020). Government Borrowing refers

19
to the government sector's demand for loans obtained through financial markets to fund

purchases not covered by taxes. In terms of the circular flow, this is one of two family saving

demands that are channeled into financial markets, the other being investment borrowing. The

most common way for governments to borrow is to issue securities, such as government bonds

and bills. Countries with poor credit ratings may borrow directly from supranational entities (US

legal, 2021). The key to accelerating economic growth and development is borrowing at a

reasonable rate to support public and infrastructural improvements. Excessive borrowing without

sufficient investment planning, on the other hand, can lead to a significant debt burden and

interest payments, which can have a number of negative economic implications (Joy & Panda,

2020). The government's capacity to invest more productively in infrastructure, education, and

public health may be hampered by rising debt levels (Soludo, 2003).

Government borrowing is one of the approaches used in financing government projects,

even though the approach is not the only way the government can change its operations as she

can also create money to monetize its debts, and by creating money to finance government

operations, the need to pay interest may be removed (Martin, 2009).

According to Kibul (1997), the fundamental factor that causes government borrowings to rise is

overreliance on external borrowings to augment capital formation in the nation ‘s or state

economy. If the interest payment is high, the deficit on the current account will also be high

thereby resulting in the huge debt burden. Isaac and Rosa (2016) also postulated that sub-

national governments acquire debt mainly to finance public investment projects that complement

the private investments to translate into improved economic growth from which the contracted

debt becomes sustainable and no risk for their finances. Nassir and Wani (2016) opined that a

debt implies an obligation to pay money, deliver goods, or render service under an express or

20
implied agreement. Hence, they described government borrowing as the total debts of the nation

which include debts of national, state and local governments that revealed how much public

spending is financed through borrowing instead of taxation. Obi (2014) argued that most

theoretical literature on the nexus between external borrowing stock and development-focused

largely on the adverse effects of debt overhang. Debt overhang, according to Krugman (1998), is

defined as a condition by which the expected repayment on external borrowing falls short of the

contractual value of debt. If the level of a state’s debt is expected to exceed the State's ability to

repay with some probability in the future, expected debt service is likely to be an increasing

function of the output level of the country. The returns from investing in the domestic economy

may effectively be taxed away existing foreign creditors and investment by foreign and domestic

investors, and hence, economic development is discouraged. According to Dewett and Navalur

(2012) Government borrowing refers to borrowing by a government from within the country or

from abroad, from private individuals or association of individuals or from banking and non-

banking financial institutions. Government borrowing is of various kinds. They include the

following:

Internal borrowing: Internal /domestic borrowing is raised from within the country(Dewett and

Navalur, 2012). Jinghan (2010), opined that internal/domestic borrowing is that debt which is

raised by the government from individuals, etc within the country. According to Okafor and

Obasi (2011), internal or domestic borrowing is that debt which is raised by the government from

individuals, firms and institutions within the country. Anyanwu (2003) defined Internal

borrowing as the total amount of money owed by the governments to the financial institutions,

government and other bodies residing in the country.

21
External borrowing: Dewett and Navalur (2012) opined that external borrowing is the debt

owed to foreigner or foreign governments or institutions while according to Jhinghan (2010) in

the case of external borrowing, the government borrows from persons or institutions outside the

country.

Government borrowing also varies and as such can further be classified as under:

 Voluntary borrowing and compulsory borrowing: The voluntary borrowing are loans

which are freely given to the government. All Government borrowing are without

coercion or force except during emergencies or war. However, Government borrowing

incurred during crises when people are compelled to lend or buy government bonds is

referred to as compulsory borrowing.

 Redeemable borrowing and irredeemable borrowing: Redeemable borrowing is that

which is repayable by the government after a fixed period of time. The interest is paid as

agreed but the principal is paid only on maturity. On the other hand, irredeemable

borrowings are debts whose principal are not repaid on maturity. Interest is regularly paid

for a period agreed which is normally long enough to cover the principal amount

[Link], borrowings incurred during war can be treated as non-redeemable.

 Funded borrowing and unfunded borrowing: funded borrowing is an interest-bearing

long-term loan to the government. With clear terms, and conditions of repayment stated

in the borrowing instrument. (certificate), the government prepares a way of repayment at

maturity. But unfunded debt is for a short period usually less than a year a d its

repayment does not require any special arrangement. It is repaid from current receipts.

 Productive borrowing and unproductive borrowing: productive borrowing are

borrowings that are fully covered by assets of equal or greater value. And the source of

22
 money for payment of interest is the income generated from the project. While

unproductive borrowing are debts not backed up directly with any existing income

generating assets like debts incurred to finance budget deficit, war, rehabilitation of

earthquakes or flood victims etc (Okafor and Obasi, 2011),

The major sources of Akwa Ibom State's external borrowings include:

 The Paris club of creditors: this represents only government guaranteed credits. The

countries and states involve guaranteed the export activities of their nationals through

official export credit agencies. if the recipient nation’s or State's government is unable to

pay the foreign exchange equivalent of the domestic currency cover paid by the importer,

it becomes government borrowings owed to the creditor nations or states. Members of the

club include United States of America, United Kingdom, Federal Republic of Germany,

France and Canada.

 London club of creditors: They are mainly uninsured and unguaranteed borrowings of

commercial banks in industrial countries to nationals of borrowing nations. Members of

the club are the commercial banks.

 Multilateral creditors: these are international institutions funded by member nations

that provide credit for development purposes. Example of such institutions include: The

World Bank, International Monetary Fund, African Development Bank, International

Development Association International Finance Corporation.

 Promissory Note Creditors: These are uninsured trade credits arising mainly from trade

arrears. The borrowings are refinanced by the issuance of promissory notes to the

creditors by the borrowing nation.

23
 Bilateral and private sector creditors: a bilateral credit is provided by a government to

another government usually for development purposes. Private sector credits are usually

from commercial banks and are short-term in nature (Chinweoke,2014).

The instruments used for domestic borrowing according to Njoku (2009) include:

 Treasury bills: These are debt instruments of the federal government. The federal

government of Nigeria uses a treasury bill as an instrument of borrowing short term, say

91-days, from the prospective lenders mostly banks -pending the collection or receipt of

government revenue from various taxes. Treasury bills are usually issued and sold by the

Central Bank of Nigeria (CBN) on behalf of the federal government.

 Treasury certificate: This is a sister borrowing instrument to the government treasury

bill. Treasury certificate is a medium-term federal government security which matures

after a period of one to two years. It is issued by the CBN on behalf of the federal

government, and its issuance is about two to three times a year. It is designed to bridge

the gap between the 91-day treasury bill and the longterm government securities such as

development stocks and bonds.

 Eligible development stocks: These are federal government stocks which are usually

issued by the CBN on behalf of the federal government, each with a maturity of not more

than three years. Any eligible development stocks bought by a bank count as the bank’s

liquid assets in its calculation of the statutory liquidity ratio.

 Bond issue: This is an instrument of indebtedness issued by a long-term borrower in

favour of a lender or bond holder to exercise a claim on the assets of the borrower. It is an

acknowledgement of indebtedness of the borrower.

24
  Revenue bond: This is issued at the capital or bond market by the state or local

government to raise long term funds for the financing of development projects. Revenue

bond is usually backed with an undertaking giving by the borrowing entity to utilize all

expected revenues or part thereof which are to be generated from the project being

financed in direct liquidation of the borrowing.

 General obligations bond: This type of bond is normally issued by a state or local

government to raise funds for the construction of roads and erection of government

buildings. It has to be backed by a full credit position of the issuer or by the state’s tax

generating power and capacity. This means that where a state government issues a

general obligations bond, the rating of such bond will be based on and limited to

economic resources of tax payers in the state and the state’s share of revenue from the

federation account.

Okafor and Obasi (2011) argued that the internal sources of public borrowing include: borrowing

from individuals by selling bonds, borrowing from non-banking financial institutions by selling

bonds to them, borrowing from commercial banks and borrowing from central bank. According

to Likita (1999) several factors have been identified as major contributory reasons for the

existence of public debt in Nigeria. The factors include oil price shock, project viability rise in

interest rate, international economic recession and neglect of non-oil sector.

2.1.2 Economic Development

The process of developing wealth for the benefit of a community is known as economic

development. It's more than an employment program; it's an investment in your community's

economic growth and improved wealth and quality of life (California Association for Local

25
Economic Development (CALED), 2021). Economic development strategies used to focus on

industrialization and infrastructure, but since the 1960s, they havee become more concerned with

poverty alleviation (Finnemore, 1996). Improvements in a range of sectors or indicators, such as

literacy rates, life expectancy, and poverty rates, are often associated with economic

development (Pritchett, Woolcock, and Andrews 2013). Economic development is the

transformation of simple, low-income national economies into modern industrial economies

(Myint and Krueger, 2000). The human development index (HDI), which is published on a

regular basis by the United Nations Development Programme (UNDP) in its Human

Development Report, is the most well-known indicator of development. The HDI is a composite

indicator that ranks countries based on how well they perform across three categories.

Specifically, life expectancy, education, and GDP per capita in PPP dollars (UNDP, 2011).

2.2 Empirical Review

Panagiotis (2018) empirically investigated the nexus between government borrowings

and the determinants of economic development such as private and government consumptions,

investment, trade openness and population growth in Greece through the applications of unit root

tests and auto-regressive distributed lag (ARDL) model. The unit root tests indicated mixed

integration of order zero and order one among the variables. These results of the ARDL model

revealed a long-run relationship trade openness had positive effects on economic development;

while government debt and population growth has a negative impact on development. The study

also addresses the break effects issue between government borrowings and economic

development. The results indicated that the nexus between borrowings and development depends

on borrowing breaks. Particularly, at borrowings levels before 2000, the effect on economic

development diminished rapidly and the development impacts become [Link] and

26
Ifeana (2017) examined the impact of government borrowings on gross domestic product in 16

Latin American economies including Bolivia, Argentina, Chile, Brazil, Costa Rica, Colombia,

Dominican Republic, Mexico, Honduras, Panama, Nicaragua, Peru, Paraguay, Venezuela and

Uruguay for the period 1960-2015 using Two-Stage Least Squares (2-SLS) in the analysis.

The variables employed in the analysis include the initial level of GDP per capita, the

growth rate of GDP per capita, gross government borrowings as a share of GDP, investment rate

proxied as gross fixed capital formation as a share to GDP and population growth rate. The

results indicated that debt has a positive impact on GDP growth but declines to close to zero

beyond government borrowings-to-GDP ratios between 64% and 71% up to this threshold,

additional borrowings have a stimulating impact on development. Nassir and Wani (2016)

investigated the relationship between government borrowings and economic development in

Afghanistan for the period 2008-2012 using analysis of variance (ANOVA). The variables

employed in the study include the gross domestic product (GDP), government stock, Advances

from commercial banks and external debt. The result showed that government stock, Advances

from commercial banks and external debt have negative and insignificant influence on the gross

domestic product (GDP) in Afghanistan. Thus, the study recommended that the government

should develop a framework for recording and monitoring all contingent liabilities and also

formulate and implement a policy for the management of the contingent liabilities. More so, it

recommended that the government should continue to implement wider economic reform

policies that promote investment in treasury bonds and encourage institutional investors such as

pension funds and insurance companies to invest in Treasury [Link] and Rosa (2016)

examined the effect of government borrowings and government investments on economic

development in Mexico for the period 1993-2012 using dynamic models of panel data and the

27
generalized method of moments in the analysis. The variables used in the study were a nominal

budget deficit, public income, public spending, the volume of interest paid, the nominal effective

rate of interest and the total value of domestic government borrowings.

The empirical results showed that public debt has a positive influence on public

investment and economic development in the economy. Naeem (2015) examined the

consequences of government borrowings for economic development investment in the

Philippines for the period 1975-2010 using the autoregressive distributed lag technique. The

results showed that government external borrowings have a negative and significant impact on

economic growth and investment, which confirm the existence of a debt overhang effect.

However, the study could not confirm the existence of crowding out hypothesis since debt

servicing revealed significant relationships with investment and economic development in the

economy. The study also indicated that domestic borrowings had a negative influence on the

investment and positive effect on economic development. Therefore, the study recommended

that for economic development to be accelerated, the developing countries should adopt those

policies that are likely to result in reducing their borrowings burden and must be allowed to reach

unsustainable level. Precious (2015) examined the effects of both government external and

domestic borrowings on economic development in Swaziland for the period 1988-2013 by

applying unit root test and ordinary least square (OLS) approach. The variables used in the study

were real gross domestic product growth rate, external borrowings, domestic borrowings,

government expenditure and inflation rate. The study discovered that external debt has

insignificant influence on economic development.

Hence, the study recommended that the government of Swaziland encouraged sustainable

external and domestic borrowings and utilized the fund in productive economic activities. Lucky

28
and Godday (2017) empirically examined the nexus between the government borrowings

structure and the development performance of the Nigerian economy for the period 1990-2015

using simple and multiple regression analyses. The variables used in the analysis include gross

domestic product, domestic borrowings, external borrowings and total borrowings. The results of

the simple regression total government borrowings have a positive and significant impact on

gross domestic product in Akwa ibom state. Similarly, the results of the multiple regression

analysis revealed that whereas the external borrowings is negative and significant to economic

development in Akwa ibom state. Therefore, the study recommended that Akwa ibom state

should pursuedomestic policies as against its external borrowings counterpart. Elom-Obed, Odo,

Elom and Anoke (2021) carried out research on the nexus between government borrowings and

economic development in Akwa ibom state for the period 1993-2020 using co-integration test,

Vector Error Correction Model (VECM) and Granger causality test. The variables employed in

the investigation were the real gross domestic product, domestic private savings, external

borrowings and domestic borrowings. The empirical results revealed that external borrowings

and domestic borrowings have negative and significant effects on economic development in

Akwa ibom state. More so, the results showed that domestic borrowings and external

borrowings granger caused real gross domestic product (RGDP) with causality runs from

external borrowings and domestic borrowings of RGDP. Stephen and Obah (2022) analyzed the

impact of national savings on economic development in Akwa ibom state over the period 1990-

2021 the applications of descriptive statistics analysis and Ordinary Least Square (OLS). The

variables utilized in the investigation were the gross domestic product (GDP) and national

savings. The result indicated that national savings had a positive and significant impact on gross

domestic product (economic growth) in [Link] and Ben (2016) examined the effect of

government borrowings on economic development in Akwa ibom state from 1989 to 2014.

29
Johansen co-integration test, Error Correction Method (ECM) and the Granger Causality test are

utilized in the analysis.

The variables employed in the study include gross domestic product, external borrowings

stock, domestic borrowings stock, external borrowings service payment and domestic

borrowings service payment. The results showed evidence of long-run relationship among the

variables. The results of the ECM indicated that external borrowings servicing and external

borrowings stock have a negative and insignificant impact on economic development in Akwa

ibom state while domestic borrowings stock has a significant influence on economic

development. The results also showed that domestic borrowings service payment has a negative

and significant effect on economic development in Akwa ibom State. Therefore, the study

recommended that the government should reduce its external borrowings stock level but should

accumulate more domestic borrowings accumulation as it will contribute significantly to the

development of the [Link], Okwu, Obiwuru and Oluwalaiye (2021) investigated the

effects of domestic debt on economic growth in Nigeria from 1989 to 2020 through the

applications of descriptive statistics, unit root test, co-integration test and error correction model

(ECM) in the analysis. The variables used in the investigation were the real gross domestic

product, domestic borrowings stock, domestic borrowings service expenditure and average banks

‘lending rate. The results indicated evidence of the significant and positive impact of external

borrowings services on economic development while domestic borrowings service expenditure

has a negative and significant impact on the development of the economy.

On the other hand, the bank ‘s lending rate has a negative and insignificant effect on

development in Akwa ibom State. Igbodika, Jessie and Andabai (2016) investigated the nexus

between domestic borrowings and development of Akwa ibom State economy from 1987 to

30
2014 through the application of Ordinary Least Square (OLS) technique. Gross domestic

product, domestic borrowings, interest rate and inflation rate were the variables used in the

analysis. The empirical results indicated that the interest rate has a negative and significant effect

on the gross domestic product (GDP) in the State. The results also showed that domestic

borrowings had a positive and significant influence on the gross domestic product in Akwa Ibom

State. Peter and Fersin and (2021), studied the nexus debt burden and development tangle in

Nigeria for the period 1987-2019 by employing unit root test, co-integration test and Granger

causality test. Real gross domestic product (RGDP), domestic borrowings, external borrowings,

domestic borrowings burden, external borrowings burden, total borrowings burden and total

borrowings/GDP ratio were the variables employed in the study. The results of the co-integration

indicate evidence of long-run relationship among the variable. The Granger Causality results

revealed that various borrowings stocks granger caused the performance of the development of

the State's economy.

2.3 Case Study Literature

This study area for this work is Akwa Ibom State.

Akwa Ibom State is a state in the South-South geopolitical zone of Nigeria, bordered on the East

by Cross River State, on the West by Rivers State and Abia State, and on the South by the

Atlantic Ocean. The States derives its name from the Qua Iboe River which bisects the state

before flowing into the bight of Bonny. Akwa Ibom was split from Cross River State in 1987

with its capital Uyo and with 31 local government areas.

31
 Akwa Ibom State has been inhabited by various ethnic groups for hundreds of years,

primarily the closely related Ibibio, Anaan, and Obolo-Oron peoples in the North-Earth, North-

West, and Southern zones of the state, respectively. In the pre-colonial period, what is now

Akwa Ibom State was divided into various city-states like the Ibom Kingdom and Akwa Akpa

before the latter become a British protectorate in 1884 as a part of the Oil Rivers Protectorate.

This study investigates the impact of government borrowing on economic growth and

development in Akwa Ibom state from (2015-2021). Government borrows in order to close the

resource gap between savings and investment (Likita, 1999). Government also borrow to finance

investment and infrastructural projects which provides the fundamental basis for further

economic production and development among others. (Nwaeze, 2005). In Akwa Ibom state, both

domestic and external debt have witnessed an in increase over the years. Given that one of the

objectives of increases in government borrowing is to stimulate economic development and

development in the state, this huge increase in government borrowing is expected to generate a

corresponding increase in economic growth and development in Akwa Ibom state.

Unfortunately, increases in government borrowing has not been able to generate a meaningful

development in Akwa Ibom State. The study therefore also seeks to investigate the role of the

State House of Assembly in the approval of government loans. According to the Mail

Newspaper, Checks into the standing order of the House reveal that the House of Assembly had

tinkered with her standing orders thus making for loan requests from the Governor to be

considered outside public glare. Loan requests from the executive usually meet the State

Assembly in the form of a message from the Governor.

Although the new standing order is yet to be printed and put to use fully, our sources at

the State Assembly say the House leadership would rely on the amended standing order of the

32
House to accede to the Governor’s request. The Akwa Ibom State House of Assembly in

December 2020 had passed on the floor of the House an amended standing order that makes

provision for any message of the Governor to be considered at the executive section of the State

Assembly if the legislators deem fit. The standing order before the December 2020 amendment

under Order 2 rule 2 (1) of the House tagged as “Message from Governor” notes” The speaker

shall immediately after prayer or as soon as any member has taken the Oath of Allegiance read to

the House any message addressed to the House by the Governor”.

However, in the amended version which created sub-rule (4) the standing order reads that a

message from the Governor can be deliberated during an executive session if the House os

Assembly deems fit.” A message from the Governor can be deliberated at the executive session

if the members deem it fit and proper to be so considered in exceptional circumstances.” The

Mail has gathered that some members of the leadership of the House of Assembly in a meeting

recently with the Governor consented that they would authorize the loan secretly so far their

political interest in the 2023 election is protected and they also get a bite of the dark loan. Yet, it

was agreed that this particular loan approval would not be discussed on the floor of the house

else it would spark public outcry. Yet, checks by The Mail Newspaper into 2022 approved

budget shows that if the State Assembly gives the N150 billion approval of the loan under

“Other Exceptional Income: 13 percent derivation revenue arrears”. They would be engaging in

extre-budgetary acquisition as N15 billion is the budgeted revenue expectation of this revenue

source. Nonetheless, last year, the State had acquired N171.2 billion on this subhead despite

having a N61.10 billion approved budget on the revenue item. It was only in September 2021

after receiving the funds that the state revised its expected revenue on this budget item from

N61.10 billion to N193 billion. Our sources disclosed that a revised budget is expected after a

33
loan is drawn down. The reason for this loan, our sources who are privy to the plans confided, is

to be used to run the 2023 elections and also enable the governor to have an upper hand in the

payment of delegates to ensure his succession plan files.

According to Ikpaisong Reporters, Akwa Ibom State House of Assembly approves Governor

Emmanuel’s N7 billion loan request. The Akwa Ibom State Government secure the State House

of Assembly’s approval to obtain the loan for Agricultural and housing projects in the state.

Governor Emmanuel’s request of N7 billion from Central Bank of Nigeria (CBN) N5 billion was

for the cultivation of Cocoa and Maize while N2 billion loan facility was obtained for 650

Housing units in Ibiono Ibom and Itu Local Government Area of the State.

2.4 Theoretical Review

Theories are attempt to describe phenomena, realities and facts. They try to predict,

forecast, explain or describe the events which have been tested overtimes and it still remains the

same. Obviously, there are several theories of government borrowings such as the Mercantilist

doctrine, the classical theory, the neo-classical theory and others. This paper however, adopts the

neoclassical theory, as the theoretical guide for this study.

2.4.1 Neo-Classical Growth Theory

Robert Solow and Trevor Swan first introduced the neoclassical growth theory in 1956.

The theory states that economic growth is the result of three factors—labor, capital, and

technology. While an economy has limited resources in terms of capital and labor, the

contribution from technology to growth is boundless. The Neoclassical Growth Theory is an

34
economic model of growth that outlines how a steady economic growth rate results when three

economic forces come into play: labor, capital, and technology. The simplest and most popular

version of the Neoclassical Growth Model is the Solow-Swan Growth Model. The theory

postulates that short-term economic equilibrium is a result of varying amounts of labor and

capital that play a vital role in the production process. The theory argues that technological

change significantly influences the overall functioning of an economy. Neoclassical growth

theory outlines the three factors necessary for a growing economy. The Neoclassical Growth

Model claims that capital accumulation in an economy, and how people make use of it, is

important for determining economic growth. It further claims that the relationship between

capital and labor in an economy determines its total output. Finally, the theory states that

technology augments labor productivity, increasing the total output through increased efficiency

of labor. Therefore, the production function of the neoclassical growth model is used to measure

the economic growth and equilibrium of an economy. The general production function in the

neoclassical growth model takes the following form: Y = AF (K, L). Where: Y – Income, or the

economy’s Gross Domestic Product (GDP), K – Capital, L – Amount of unskilled labor in the

economy, A – Determinant level of technology. Also, because of the dynamic relationship

between labor and technology, an economy’s production function is often re-stated as Y = F (K,

AL). This states that technology is labor augmenting and that workers’ productivity depends on

the level of technology. An important assumption of the neoclassical growth model is that capital

(K) is subject to diminishing returns provided the economy is a closed economy. Impact on total

output: Provided that labor is fixed or constant, the impact on the total output of the last unit of

the capital accumulated will always be less than the one before. Steady state of the economy: In

the short term, the rate of growth slows down as diminishing returns take effect, and the

economy converts into a “steady-state” economy, where the economy is steady, or in other

35
words, in a relatively constant state. All factors are relative for the production of output, with the

exponents in the equation indicating their relative contribution and productivity that increases as

a result of technological change, in addition to changes in organization and practices. Precious,

Eze Nweke and Atuma (2019) Propose that an increase in government expenditure could be

justified if it results from a rise in education and health services because they are assumed to be

the most important investments in human capital. It is against the backdrop that the neo-classical

growth theory was adopted considering the fact that government borrowings if Secured, or

procured to finance health, education and development investments, it is referred to as being

productive, which can contribute positively to economic development via increased labour,

capital and technology.

The study adopted the Neo-classical Growth theory, as the theory suitable for analysing

and explaining the phenomena under this study given the complexities of the contemporary state

order conditioned by the emergences of huge government debt which have some negative effect

on economic growth and development. Therefore, this study focuses on the Neo-classical

Growth theory and what it entails. The applicable of Neo-classical Growth theory to government

borrowing on economic development could be conceived from the areas that outlines how a

steady economic growth rate results when three economic forces come into play: labor, capital,

and technology. However, the theory puts emphasis on its claim that temporary, or short-term

equilibrium, is different from long-term equilibrium and does not require any of the three factors.

In the course of this study; Government borrowing and Economic development in Akwa ibom

state, Neo-classical Growth theory will be anchored on.

2.5 Knowledge Gap

According to a review of the literature, many studies have been conducted on the impact of

36
government borrowing on economic development in Akwa ibom State, but none have looked

into the impact of government borrowing on economic development in Akwa ibom State. As a

result, there is a research gap that needs to be filled, and this study fills that gap. Finally, Akwa

ibom State's growing and unending government borrowing is a critical and concerning issue. As

a result, it was justified in being timely and prominently featured in order to pique the interest of

economic policymakers and academics.

CHAPTER THREE

METHODOLOGY

3.1 Introduction

This chapter of the study centered on the research methodology. This chapter provides a

methodological framework that guided the course of this study. Features of this section of the

study include: research design, study population, selection of sample/sampling techniques,

sources of data, method of data collection, and method of data analysis. These features of the

study were considered as shown hereunder:

3.2 Research Design

Research design is a plan for a study that sets out the activities to be undertaken, such as data

collection procedures and sampling strategy in order to provide answers to the research questions

(Paavo, 2017). Survey research design. The rationale for this choice of research design is that it

permits the examination of independent variables using surveys and interviews. More so, the

choice of this design was informed by the nature of the research problem and the objectives of

the study.

3.3 Population of the Study

37
Population is defined as all members of any well-defined class of people, event or objects,

Mboho (2015). Hence, the population of this study comprised of inhabitants of Akwa Ibom

State. The population of this study constitutes the population of Akwa Ibom State which is

3,902,051(National population commission, 2006).

3.4 Selection of Sample/Sampling Techniques

The sample size of this study was 149 respondents were selected for the study. This number of

employees were determined using Taro Yamane (1967) sample size determination technique as

shown hereunder:

Formula = n = n
1 + n (e) 2

Where: n = Sample Size

e= level of significance

0.05%)

N = Population Size

N = 3,902,051

1+3,902,051 (0.05)

N = 3,902,051

1+3,902,051x0.0025

N = 3,902,051

9,756.1275

N = 399.959 approximately 400

38
Hence, the sample size of this study consist of 400 respondents chosen from the three ministries

in Akwa Ibom State. Thereafter, simple random sampling technique was applied. This sampling

procedure gives each respondent equal chance of being selected. Practically, the researcher

applied this technique by giving out each copy of the research instrument to any respondents

who is available.

3.5 Sources of Data

The researcher made use of primary data in the course of this study. By implication,

primary data was used in this study. The data was collected using adapted questionnaire, which

was sourced from different sources based on the constructs used in the study. This implies that,

the items in the research instrument were adapted from different sources depending on the

relevance of the item(s) and its ability in eliciting the right responses as the items were adapted

based on the objectives of the study.

3.6 Method of Data Collection

Primary data were used in this study. To generate the said data, adapted questionnaire was

used in generating the needed responses from the respondents. Structurally, the questionnaire

was designed into two main sections, namely: section ‘A’ and section ‘B’. Section ‘A’ of the

questionnaire focused on the demographic information of the respondents, while section ‘B’

generated data that helped the researcher in testing the formulated research hypotheses as stated

in chapter one of this study. More so, the questionnaire were all structured using a five point

Likert rating scale of 5 point = strongly agree to 1 point = strongly disagree). This implies

that, these pattern of rating were spread evenly across the variables used in this study.

39
3.9 Method of Data Analysis

Descriptive and inferential analytical tools were used while analyzing the generated data.

Tables, frequencies, and percentage analysis comprised the descriptive tools that were used in

analyzing data relating to demographic information of the respondents. Accordingly, the null

hypotheses that was formulated for this study was analyzed using simple linear regression

analysis. Simple linear regression which is suited for speculation, prediction, analysis, control or

design were used in this study (Hyötyniemi, 2001). The rational for using simple linear

regression in this study is to explain what effects specific independent variables have on the

dependent variable. The regression effects were ascertained using the regression co-efficient

(R2). The regression co-efficient measures the variability in the dependent variable that is

accounted for by specific independent variable (Pedhazur, 1982).

3.10 Model Specification

In this study, the model is specified to capture the effect of government borrowing on

economic growth of Akwaibom State. The study adapted the model specified by Akinwunmi

(2018) which were modified for the purpose of establishing the relationship between the

dependent variables and the linear combinations of several determining variables captured in the

study. Hence, the econometric form of our model is expressed as:

EC OD t=β 0 + β 1 SHAA t + β 2 SGUT t + β 3 REPA t + μ¿

Where:

ECOD = Economic Development

SHAA = State House of Assembly Approval
SGUT = State Government Utilization
REPA = Repayment Plans
β0 = Constant
β1- β3 = Slope Coefficient
μ = Stochastic disturbance

40
t = Time-Period

41
 CHAPTER FOUR

PRESENTATION, ANALYSIS AND DISCUSSION OF RESULTS

4.0 Introduction

This study investigates the effect of government borrowing on economic growth of AkwaIbom

State. As noted, the study examines government borrowing in term of state house of assembly

approval (SHAA) of the loan, state government utilization of the loan (SGUT), and repayment

plan of the loan (REPA). The dependent variable is the economic development of AkwaIbom

(ECOD). This section makes used of both mathematical and statistical techniques to present the

analysis of the questionnaire administered and retrieved from the respondents, from which the

recommendation and conclusion are drawn from.

4.1 Data Presentation

As aforementioned, mathematical, and statistical techniques are used to present the analysis of

the questionnaire administered and retrieved from the respondents.

4.1.1 Analysis of Questionnaire

Particularly, a total of 150 questionnaire were sent out to the respondents for data generation as

shown in the table below:

Table 1: Analysis of Questionnaire

Questionnaires Copies Percentage
Retrieved 349 93%
Un-retrieved 51 7%
Total 400 100%
Source: Author Compilation from field work, 2023

42
The table above shows that out of the 150 questionnaires that was sent, 149 of them were

retrieved. This represented 99% of the total questionnaire sent and this was the number that was

used for analysis in the subsequent sections that will follow. However, 1 of the questionnaires

could not be retrieved representing 1% which is not significant.

4.1.2 Gender Distribution of the Respondents

The study also presents the analysis of the gender distribution of the respondents of which the

questionnaire was successfully retrieved. This is shown in table 2.

Table 2: Gender Distribution of Respondents

Gender No Percentage
Males 283 79%
Females 66 21%
Total 349 100%
Source: Author Compilation from field work, 2023
Also, from the retrieved questionnaire and as seen from the table above, it is observed that 118 of

the respondents were males, which represented about 79% of the total questionnaire retrieved.

Similarly, 31 of them were females representing 21% of the total questionnaire retrieved.

4.1.3 Age Distribution of the Respondents

The study also presents the analysis of the age distribution of the respondents of which the

questionnaire was successfully retrieved. This is shown in table 3.

Table 3: Age Distribution of the Respondents.

Age No Percentage
18-22 58 8%
23-27 93 25%
28-32 80 18%
33 and above 118 49%
Total 349 100%
Source: Author Compilation from field work, 2023

The table above shows that 12 of the respondents were in the age bracket of 18-22, representing

8% of the Respondents. 37 of the respondents were in the age bracket of 23-27, representing

43
25% of the Respondents. 27 of the respondents were in the age bracket of 28-32 representing

18% of the respondents. 73 of them were in the age brackets of 33 and above, representing 49%

of the total respondents.

4.1.4 Test for Reliability and Validity

In this study, the Alpha Cronbach test was employed to ascertain the reliability of the study

instrument. Specifically, Alpha was developed by Lee Cronbach in 1951 to provide a measure

of the internal consistency of a test or scale; it is expressed as a number between 0 and 1. Internal

consistency should be determined before a test can be employed for research or examination

purposes to ensure validity. In addition, reliability estimates show the amount of measurement

error in a test. Put simply, this interpretation of reliability is the correlation of test with itself.

Squaring this correlation and subtracting from 1.00 produces the index of measurement error.

Table 4: Test for Reliability

Source: Author Compilation from STATA 14

The table above shows the Cronbach Alpha test for reliability, consistency and validity of the

study instrument which is the questionnaire. The minimum acceptable value for Cronbach's

alpha is 0.50; Below this value the internal consistency of the common range is low. Meanwhile,

the maximum expected value is 0.90; Above this value is perceived as redundancy or

duplication. Alpha values between 0.55 and 0.90 are usually preferred. In this study, the

44
Cronbach Alpha test results as seen from the table above show a value of 0.60 which makes the

instrument for this study reliable and valid.

4.1.6 Normality Test

Basically, there are three common ways to check the normality assumption. The easiest way is

by using graphical methods. The normal quantile-quantile plot (Q-Q plot) is the most used and

effective diagnostic tool for checking normality of the data. Other common graphical methods

that can be used to assess the normality assumption include histogram, boxplot, and stem-and-

leaf plot. Even though the graphical methods can serve as a useful tool in checking normality for

sample of n independent observations, they are still not sufficient to provide conclusive evidence

that the normal assumption holds. Therefore, to support the graphical methods, more formal

methods which are the numerical methods and formal normality tests should be performed

before making any conclusion about the normality of the data. The numerical methods include

the skewness and kurtosis coefficients whereas normality test is a more formal procedure

whereby it involves testing whether a particular data follows a normal distribution. There are

significant amount of normality tests available in the literature. However, the most common

normality test procedures available in statistical' software are the Shapiro-Wilk (SW) test,

Kolmogorov-Smimov (KS) test, Anderson-Darling (AD) test and Lilliefors (LF) test. This study

is based on the Shapiro and Wilk test for normality. Particularly, when testing for normality,

where the probabilities > 0.05, it indicates that the data are NORMAL. Conversely, where the

probabilities < 0.05, it indicates that the data are NOT NORMAL.

Table 5: Test of Data Normality

45
Source: Author (2023)

Table 5 shows the result obtained from the Shapiro-Wilk normality test for the data employed in

this study. It is observed that the dependent variable of economic development (Z=2.591;

Prob>Z=0.00478) is not normally distributed since the probability of the z-statistic is significant

at 5% level. In the case of the independent variables, statehouse of assembly approval of the loan

(Z=3.343; Prob>Z=0.00041) are not normally distributed since the probabilities of the z-statistics

are significant at 5% level. However, state government utilization of the loans (Z=-0.040;

Prob>Z=0.51585) and repayment plan of the loans (Z=0.686; Prob>Z=0.24625) follows a

normal distribution since the probability of the z-statistic is insignificant at 1% or 5% level. The

interpretation of the data normally test is in line with the studies of Jarque and Bera (1987).

4.2 Data Analyses

In this study, the association between the independent variables and the dependent variables

employed in the study is first examine using the Spearman Rank correlation since the data

employed does not come from a normal distribution.

4.2.1 Correlation Analysis

In statistics, the value of the correlation coefficient varies between +1 and -1. When the value of

the correlation coefficient lies around ± 1, then it is said to be a perfect degree of association

between the two variables. As the correlation coefficient value goes towards 0, the relationship

between the two variables will be weaker. Usually, in statistics, we measure three types of

46
correlations: Pearson correlation, Kendall rank correlation and Spearman correlation. Pearson

correlation is widely used in statistics to measure the degree of the relationship between linear

related variables. Kendall rank correlation is a non-parametric test that measures the strength of

dependence between two variables. Spearman rank correlation test does not assume any

assumptions about the distribution of the data and is the appropriate correlation analysis when

the variables are measured on a scale that is at least ordinal. In this study, the Spearman rank

correlation is employed since the data employed does not come from a normal distribution. The

result obtain from the Spearman correlation is presented.

Table 6: Correlation Analysis

Author’s computation (2023)

In the case of the correlation between government borrowing and economic growth of

AkwaIbom state, the above results show that there exists a positive association between state

house of assembly approval of loans and economic growth of AkwaIbom State (0.6121). There is

also a positive association between state government utilization of the loans and economic

growth of AkwaIbom State (0.4942). Finally, the study shows that there is a negative and

moderate association between repayment plans of the loans and economic growth of AkwaIbom

State (-0.2928). However, to test our hypotheses a regression results will be needed since

correlation test does not capture cause-effect relationship.

4.2.2 Regression Analyses

47
In order to examine the cause-effect relationships between the dependent variables and

independent variables as well as to test the formulated hypotheses, the study relied on a pool

OLS regression analysis. The OLS regression results obtained is presented and discussed below.

Table 7: Regression Result

F-Statistics: {34.10 (0.0000)}; R-Squared: 0.4602; Mean VIF: 1.06; Hettest: {3.45 (0.0633)}

Table 7 represents the result obtained from the regression analysis for this study. From the table

it is observed from the pool OLS regression that the R-squared value of 0.4602 shows that about

46% of the systematic variations in economic growth of AkwaIbom State as the dependent

variable of the study was jointly explained by the independent variables in the model. This

implies that about 54% of the changes in economic growth of AkwaIbom State as the dependent

variable could not be explained by the variables. The unexplained part of economic growth of

AkwaIbom State can be attributed to the exclusion of other independent variables that can affect

economic growth of AkwaIbom State as the dependent variable but were captured in the error

term. Furthermore, the F-statistic value of 34.10 and the associated p-value of 0.0000 shows that

the specified model on the overall is statistically significant at 1% level. This means that the

regression model is valid and can be used for statistical inference. However, the study conducts

some post regression test to further ascertain the validity of the pool OLS regression. These tests

include multicollinearity and heteroscedasticity.

[Link].1 Test for Multicollinearity

48
Multicollinearity can mainly be detected with the help of tolerance and its reciprocal, called

variance inflation factor (VIF). Specifically, as indicated in the table above, a mean VIF value of

1.06 shows that the mean VIF is within the benchmark value of 10, this indicates the absence of

multicollinearity, and this means no independent variable should be dropped from the model.

[Link].2 Test for Heteroscedasticity

The study conducts this test by employing the Breusch Pagan module in Stata 14. Specifically,

the assumption of homoscedasticity states that if the errors are heteroscedastic then it will be

difficult to trust the standard errors of the least square estimates. Hence, the confidence intervals

will be either too narrow or too wide. The result obtained from the regression of the model as

shown in the table above reveals that the probability value of the heteroscedasticity test is

insignificant at 1% or 5% level {3.45 [0.0633]}. This result indicates that the assumption of

homoscedasticity has not been violated. Hence, the results of the OLS regression appear to be

appropriate statistically for policy interpretation and recommendation.

4.3 Test of Hypotheses

In this study, the hypotheses are tested using the result of the OLS regression in table 7.

Hypothesis 1: State house of assembly approval of the loans has no significant effect on
economic growth of AkwaIbom State

The results obtained from the OLS regression model revealed that state house of assembly

approval of the loans [coef. = 0.492 (0.000)] has a statistically significant effect on economic

growth of AkwaIbom State at 1% significant level. The result implies that the state house of

assembly of arrival of loans has a positive statistically significant effect on economic growth of

AkwaIbom State. Hence, the null hypotheses that state house of assembly approval of loans has

no significant effect on economic growth of AkwaIbom State is rejected. Therefore, the state

49
house of assembly approval of loans significantly encourages economic growth of AkwaIbom

State during the period under review.

Hypothesis 2: State government utilization of the loans has no significant effect on economic
growth of AkwaIbom State

The results obtained from the OLS regression model revealed that state government utilization of

the loans [coef. = 0.306 (0.000)] has a statistically significant effect on economic growth of

AkwaIbom State at 1% significant level. The result implies that the state government utilization

of the loans has a positive statistically significant effect on economic growth of AkwaIbom State.

Hence, the null hypothesis that state government utilization of the loans has no significant effect

on economic growth of AkwaIbom State is rejected. Therefore, the state government utilization

of the loans significantly encourages economic growth of AkwaIbom State during the period

under review.

Hypothesis 3: Repayment plans of the loans has no significant effect on economic growth of
AkwaIbom State

The results obtained from the OLS regression model revealed that repayment plans of the loans

[coef. = -0.154 (0.006)] has a statistically significant effect on economic growth of AkwaIbom

State at 5% significant level. The result implies that the repayment plans of the loans has a

negative statistically significant effect on economic growth of AkwaIbom State. Hence, the null

hypothesis that repayment plans of the loans has no significant effect on economic growth of

AkwaIbom State is rejected. Therefore, the repayment plans of the loans significantly

discouraged economic growth of AkwaIbom State during the period under review.

4.4 Discussions of Results

50
The results obtained revealed that the state house of assembly approval of loans, government

utilization of the loan have a statistically significant effect on economic growth of AkwaIbom

State at 1% significant level. The result implies that the state house of assembly of approval of

loans and state government utilization of the loan have a positive statistically significant effect

on economic growth of AkwaIbom State. Therefore, the state house of assembly approval of

loans and state government utilization of the loan significantly encourages economic growth of

AkwaIbom State during the period under review. However, repayment plans of the loans has a

statistically significant effect on economic growth of AkwaIbom State at 5% significant level.

The result implies that the repayment plans of the loans has a negative statistically significant

effect on economic growth of AkwaIbom State. Therefore, the repayment plans of the loans

significantly discouraged economic growth of AkwaIbom State during the period under

[Link] inability of the Nigerian government to accumulate resources so as to fill the usual

budget deficit experienced in the country over the years occasioned the consistent dependence on

public debt especially foreign debt which is often typified by adverse lending conditions,

instability of foreign exchange rates and the potential repudiation that occasions debt overhand,

hence exerting negative effects on the economic growth (Akinwunmi and Adekoya, 2018).

The findings of this study are in line with prior studies of Saifuddin, 2016; Idenyi, Ogonna and

Ifeyinwa, 2016; Jernej, Aleksander and Miroslav, 2014; Muhammad, Ruhaini, Nathan and

Arshad, 2017; Siew-Peng and Yan-Ling, 2015; Egbetunde, 2012; Amilcar, 2016; Rahman, 2012.

External debt being an economic policy geared towards enhancing the productive capacity of the

nation through the delivery of enduring assets and implementation of quality policies towards

increasing the growth of the nation, it possesses the capacity to increasing the economic growth

of the state. The resurgence of the global financial crisis in 2007 has underscored the

destabilizing effects of excessive public debt service costs build-up in developing and emerging

51
economies (International Monetary Fund “IMF”, 2018). This finding contradicts the position of

Soydan and Bedir (2015) who argue that debtor countries use a substantial amount of newly

borrowed resources in debt servicing thus negatively affecting productive investments. The

growth in domestic public indebtedness, according to Clements et al. (2003), added to the

growing uncertainty about actions and policies that the government will adopt in order to meet

its debt servicing obligations – negatively affecting both private investment and foreign direct

investment decisions.

52
 CHAPTER FIVE

SUMMARY, CONCLUSION AND RECOMMENDATION

5.1 Summary of Findings

This study investigates the effect of government borrowing on economic growth of Akwaibom

State. As noted, the study examines government borrowing in terms of state house of assembly

approval (SHAA) of the loan, state government utilization of the loan (SGUT), and repayment

plan of the loan (REPA). The dependent variable is the economic development of Akwaibom

(ECOD). In order to examine the cause-effect relationships between the dependent variables and

independent variables as well as to test the formulated hypotheses, the study relied on a pool

OLS regression analysis. The results of empirical findings are as follows.

i. state house of assembly approval of the loans [coef. = 0.492 (0.000)] has a statistically

significant effect on economic growth of AkwaIbom State at 1% significant level.

ii. state government utilization of the loans [coef. = 0.306 (0.000)] has a statistically

significant effect on economic growth of AkwaIbom State at 1% significant level.

iii. repayment plans of the loans [coef. = -0.154 (0.006)] has a statistically significant effect

on economic growth of AkwaIbom State at 5% significant level.

5.2 Conclusion

An increase in the gross domestic product of a state is noticed as the productive capacity of the

country accrues, especially when measured relative to other periods. Hence, economic growth is

observed when the total goods and services of a state increases relative to the previous years. The

association government borrowing and the economic growth of developing states has over the

years been recognized amongst policy holders and researchers all over the world. Meanwhile, the

implication of government borrowing has been insignificantly considered, especially in the

literature due to the uncritical nature of its conditions. Using responses from 149 respondents of

3 ministries in AkwaIbom, this study explored the effect of government borrowing on economic

53
growth of Akwaibom State. The study concluded that state house of assembly approval of loans,

government utilization of the loan have a statistically significant effect on economic growth of

AkwaIbom State at 1% significant level. The result implies that the state house of assembly of

approval of loans and state government utilization of the loan have a positive statistically

significant effect on economic growth of AkwaIbom State. Therefore, the state house of

assembly approval of loans and state government utilization of the loan significantly encourages

economic growth of AkwaIbom State during the period under review. However, repayment

plans of the loans has a statistically significant effect on economic growth of AkwaIbom State at

5% significant level. The result implies that the repayment plans of the loans has a negative

statistically significant effect on economic growth of AkwaIbom State.

5.3 Recommendations

From the findings of this study, the researcher carefully makes the following recommendations.

1. Premise on the result, state house of assembly should grant approval to loan applications

by government to enhance economic and social development.

2. Loans obtained by state government should be strictly utilize for the purposes intended to

ensure positive effect and government should cut down on domestic borrowing.

3. The government should ensure that contracted debts are directed towards encouraging

investment in the state so as to increase capital formation in the state and consequently

sustainable economic development.

5.4 Contribution to Knowledge

This study has made several contributions to the body of knowledge in the field government

borrowing on economic growth, as well as help in identifying the important elements that are

crucial to economic development. Hence, this study was able to expand the boundary of the

54
existing literature. Finally, the findings from this study provided empirical evidence that

government borrowing has a significant and positive impact on economic development. Thus,

the study is projected to contribute to the development of the state.

5.5 Suggestion for Further Studies

This study obtained an R2 of 46% and thus further studies should therefore be expanded further

in order to include other aspects that influence economic development in AkwaIbom State apart

from the government borrowing proxies employed in this study. Existing literature indicates that

as a future avenue of research, there is need to undertake similar research in other sectors in

order to establish whether government borrowing herein can be generalized to affect economic

development.

55
 REFERENCES

Akinwunmi, A. A., & Adekoya, R. B. (2018). Assessment of the impact of external borrowing
on the economic growth of the developing countries-Nigerian Experience. Asian Business
Research, 3(1), 29.

Saifuddin, M. D. (2016). Public debt and economic growth: Evidence from Bangladesh. Global
Journal of Management and Business Research. 3(1), 29.

Ogonna, I. C., Idenyi, O. S., Ifeyinwa, A. C., & Gabriel, N. U. (2016). The implications of rising
public debt on unemployment in Nigeria: An auto regressive distributed lag
approach. Asian Research Journal of Arts & Social Sciences, 1-15.

Mencinger, J., Aristovnik, A., &Verbic, M. (2014). The impact of growing public debt on
economic growth in the European Union. Amfiteatru Economic Journal, 16(35), 403-414.

Burhanudin, M. D. A., Muda, R., Nathan, S. B. S., & Arshad, R. (2017). Real effects of
government debt on sustainable economic growth in Malaysia. Journal of International
Studies, 10(3).

Lee, S. P., & Ng, Y. L. (2015). Public debt and economic growth in Malaysia. Asian Economic
and Financial Review, 5(1), 119-126.

Egbetunde, T. (2012). Public debt and economic growth in Nigeria: Evidence from granger
causality. American journal of economics, 2(6), 101-106.

Amilcar, S. (2016).“Impact of public debt on economic growth in advanced economies”.

International Journal of Managerial Studies and Research (IJMSR),4(2), 70-76

Abd Rahman, N. H. (2012). How Federal Government's Debt Affect the Level of Economic
Growth?. International Journal of Trade, Economics and Finance, 3(4), 323.

Soydan, A., &Bedir, S. (2015). External debt and economic growth: New evidence for an old
debate. Journal of Business Economics and Finance, 4(3).

Clements, B., Bhattacharya, R., & Nguyen, T. Q. (2003). External debt, public investment, and
growth in low-income countries. Journal of Business Economics and Finance, 4(3).

Karagöl, E., &Özdemir, K. (2004). Is There Externality from the Government Sector and the
Non-Government Sector? A Feder Model Approach. Asian Research Journal of Arts &
Social Sciences, 1-15.

Hansen, H. (2002). The impact of aid and external debt on growth and investment (No. 02/26).
Credit Research Paper.

Karagol, E. (2002). External debt and economic growth relationship using the simultaneous
equations. Universitäts-und Landesbibliothek Sachsen-Anhalt.
56
Serieux, J., & Samy, Y. (2001). Debt, Debt Relief and the Poorest: Small Steps in a Long
Journey. Canadian Journal of Development Studies/Revue canadienned'études du
développement, 22(2), 289-295.

Weeks, J. (2000). Latin America and the ‘high performing Asian economies’: growth and
debt. Journal of International Development: The Journal of the Development Studies
Association, 12(5), 625-654.

Cohen, D. (1993). Growth and external debt. CEPR Discussion Papers, (778).

Cunningham, R. T. (1993). The effects of debt burden on economic growth in heavily indebted
developing nations. Journal of economic development, 18(1), 115-126.

Savvides, A. (1992). Investment slowdown in developing countries during the 1980s: Debt
overhang or foreign capital inflows?. Kyklos. 18(1), 115-126

57
 APPENDICES

___ ____ ____ ____ ____ (R)

/__ / ____/ / ____/
___/ / /___/ / /___/ 15.0 Copyright 1985-2017 StataCorp LLC
Statistics/Data Analysis StataCorp
4905 Lakeway Drive
College Station, Texas 77845 USA
800-STATA-PC [Link]
979-696-4600 stata@[Link]
979-696-4601 (fax)

Single-user Stata perpetual license:

Serial number: 301506215585
Licensed to: Idorenyin Okon
IdRatios Nigeria

Notes:
1. Unicode is supported; see help unicode_advice.

Source | SS df MS Number of obs = 149

-------------+---------------------------------- F(3, 146) = 34.10
Model | 38.7862098 3 9.69655246 Prob > F = 0.0000
Residual | 45.4968173 146 .284355108 R-squared = 0.4602
-------------+---------------------------------- Adj R-squared = 0.4467
Total | 84.2830271 149 .513920897 Root MSE = .53325

------------------------------------------------------------------------------
ecod | Coef. Std. Err. t P>|t| [95% Conf. Interval]
-------------+----------------------------------------------------------------
shaa | .4921543 .0670186 7.34 0.000 .3597992 .6245094
sgut | .3056984 .059933 5.10 0.000 .1873366 .4240602
repa | -.1537485 .0552841 -2.78 0.006 -.2629292 -.0445678
_cons | 1.493323 .4851327 3.08 0.002 .5352338 2.451412
------------------------------------------------------------------------------

58
 Variable | VIF 1/VIF
-------------+----------------------
shaa | 1.15 0.872490
sgut | 1.11 0.899593
repa | 1.05 0.956078
-------------+----------------------
Mean VIF | 1.06

Breusch-Pagan / Cook-Weisberg test for heteroskedasticity

Ho: Constant variance
Variables: fitted values of txcm

chi2(1) = 3.45
Prob > chi2 = 0.0633

Test scale = mean(unstandardized items)

average
item-test item-rest interitem
Item | Obs Sign correlation correlation covariance alpha
-------------+-----------------------------------------------------------------
ecod | 149 + 0.8079 0.6165 .0533656 0.6051
shaa | 149 + 0.2407 0.0320 .1628676 0.6449
sgut | 149 + 0.6942 0.4599 .0819556 0.6117
repa | 149 + 0.6551 0.3703 .0913976 0.6008
-------------+-----------------------------------------------------------------
Test scale | .1005093 0.6012
-------------------------------------------------------------------------------

Shapiro-Wilk W test for normal data

Variable | Obs W V z Prob>z

-------------+------------------------------------------------------
ecod | 149 0.97531 3.118 2.591 0.00478

59
shaa | 149 0.96565 4.338 3.343 0.00041
sgut | 149 0.99222 0.983 -0.040 0.51585
repa | 149 0.98930 1.352 0.686 0.24625

| ecodshaasgutrepa
-------------+------------------------------------
ecod | 1.0000
shaa | 0.6121 1.0000
sgut | 0.4942 0.0327 1.0000
repa | -0.2928 -0.0270 -0.2190 1.0000

60
 APPENDIX 1

Department of Public Administration

Faculty of Management Sciences

Akwa Ibom State University

Obio Akpa Campus

05 May, 2023.

Dear Esteemed Respondent

LETTER OF INTENT

I am Moses, Nsikak Manoah a students of the above institution and department with the

registration number: AK18/MGT/PAD/036. I am conducting a research on the topic:

Government borrowing and economic development from 2015-2021: A case study of Akwa

Ibom State. Consequently, your organization has been chosen as the organization were this study

will be carried out.

I am seeking to collect information on the above mentioned subject matter. Please kindly give

your candid views on the issues surrounding this topic. The data collected based on your

responses will be used only for academic purposes. All information supplied will be treated with

utmost sense of confidentiality.

Thanks for your kind co-operation.

Yours faithfully,

Moses, Nsikak Manoah

(Researcher)
61
 SECTION A
Demographic data of the Respondents

INSTRUCTION: Please, kindly fill in your opinion by ticking () in the appropriate box provide
beside the options. Each question should have only one answer.
1. Gender: Male Female
2. Age Distribution:

18-22

23-27

28-32

33 and Above

3. Education Qualification: SSCE OND/HND/[Link] [Link] [Link]./Ph.D

Other qualifications

62
 SECTION B

INSTRUCTION: Please ticks () in any appropriate option that best express your opinion. The
following are the options:
Where:
1. Questions on Government Loans
S/N QUESTIONS SA A UN D SD
1 Citizens of the State are usually consulted before the State
Government takes loan
2 Government borrowing on Akwa Ibom State are sought
after open discussion.
3 The State Government usually seeks approval of the State
House of Assembly before acquiring loans
4 The loans are utilize for State infrastructures
5 Free education in the State is courtesy of government loans
6 Free education in the state is courtesy of government loans
7 Loans acquired are used to empower the youths
8 Government borrowing are repaid through revenues
generated from the infrastructures provide.
9 The loans are used to set up skilled training schemes in
Akwa Ibom State
10 The loans are paid by the state government
11 Part of the internally generated revenue by the state
government is used to repay government loans
12 Loans acquired by the government has helped in the
economic development of Akwa Ibom State
13 Youth empowerment through the loans have reduce the rate
of social vices in Akwa Ibom State
14 The physical development through the loans attract tourists
to Akwa Ibom State.

63
64