Mixed results exist in literature on the debt-to-GDP ratios of sovereign nation’s vis-à-vis the recommended thresholds by the International Monetary Fund (IMF). This study aims to ascertain relationship subsisting between Nigeria’s public debt and her gross domestic product (GDP) from 1981 to 2015, and undertake a comparative analysis of IMF public debts prudential standard (theory) with Nigeria’s actual debt-to-GDP status (practical), a theopractical analogy. Paired t-test analysis of Nigeria’s * actual debt-to-GDP ratio and the recommended threshold by the IMF shows that there exists a statistical difference between the Nigeria’s actual debt-to-GDP ratio which was below 20% throughout the study period and also below the 40% threshold recommended by the IMF for developing countries which should be sustained. This result shows that Nigeria currently has high borrowing capacity which the economy can sustain in both the short and long runs without negative effects on the economy.
BY: Emecheta, Ngozi Gabriel and Nwidobie, Barine Michael