Public debt has become essential to most developing countries in financing their budget deficits especially, for the purpose of investment in human capital, research for innovation, and infrastructure that would aid technological advancement and in turn encourage wealth creation. This study analyzed the effect of public debt on wealth creation in Nigeria. Using secondary data for the period 1981 to 2022, and following the Autoregressive Distributed Lag methodology, the study reveals that public debt (as measured by domestic and external debt) has positive effects on wealth creation in Nigeria in the short-run. However, in the long-run, external debt has a weak negative effect on wealth creation. Thus, the study concludes that public debt is an important source of funding for investments that are capable of spurring growth in wealth.

Nonetheless, ensuring debt sustainability is paramount if the wealth benefits are to be enjoyed into the long term. The study therefore, recommends the judicious use of public debt by the government through the prioritization of investments that are capable of enhancing the nation’s productivity such as investments in human capital development, and in research and development. This way the benefits of public debt will not be overtaken by the burden of its repayment in the long run.