Being one of the important sources of government revenue, both the
developed and developing economies borrow to close the gap that exists
between government revenue and expenditure. This study estimated the
effects of public debt on unemployment and inflation in Nigeria. A 40 years’
time-series annual data on external debt, domestic debt, unemployment and
inflation, spanning from 1980 to 2020 was used. Relevant diagnostic tests
using E-views were conducted to test for unit root and granger causality.
Autoregressive Distributive Lag Model (ARDL) Error Correction Model
were employed to analyze the data. The findings revealed that public debt
and unemployment have a log run relationship. When borrowing increase in
Nigeria, unemployment increases the more. Further findings indicated that
domestic debt causes less unemployment than external debt. However,
cointegration analysis pointed no long-run relationship existing between
public debt and inflation. The study urges the government to consider other
important sources of revenue generation than borrowing. When borrowing
becomes necessary then priority on internal debt is highly recommended.