Pathways to sustainable human development in Nigeria: The role of governance and disaggregated domestic debt

Research that explicitly focuses on sustainable human development, an integrative approach that captures economic, social, and environmental dimensions remains limited. Most prior studies have examined human development through a narrow lens, often excluding the environmental sustainability component that is vital for intergenerational equity and long-term resilience. This study addresses this gap by employing the Sustainable Human Development Index (SHDI), thereby aligning the analysis with the broader objectives of the Sustainable Development Goals (SDGs). Moreover, while existing literature on public debt has largely centered on external debt, this study shifts focus to domestic debt, which now constitutes a dominant share of Nigeria’s total public debt. Recognizing the structural distinctions between debt types, the analysis further disaggregates domestic debt into bank-based and nonbank-based components to assess their differentiated effects. Using quarterly data from 1996 to 2022 and the Nonlinear Autoregressive Distributed Lag (NARDL) model, the study explores both symmetric and asymmetric relationships between public debt, governance quality, and sustainable human development. The findings reveal that positive changes in domestic bank-based debt reduce sustainable human development, whereas negative changes improve it. Conversely, positive shocks to domestic nonbank-based debt enhance sustainable human development outcomes, while negative shocks have a detrimental effect. Governance quality significantly improves sustainable human development, and its interaction with nonbank-based debt both independently and jointly amplifies this positive effect. The study recommends strengthening governance institutions to enhance the developmental impact of public debt and promoting a strategic shift toward nonbank-based domestic borrowing, which has demonstrated a more consistent contribution to sustainable human development.