A DESCRIPTIVE ANALYSIS OF DEBT FINANCING AND PUBLIC EXPENDITURE IN BAYELSA STATE

Abstract

The purpose of this study is to descriptively analyze debt financing and public expenditure in Bayelsa State to examine its sustainability. To achieve this goal, a review of extant literature was made and the public choice theory was adopted in the study. The population of the study is the Bayelsa State economy on debt financing and public expenditure. The period of fifteen (15) years (2010-2024) was considered for this analysis. Since the data for the study already existed, the ex post facto research design was adopted in the study. The data for the study was sourced from the published Bayelsa State Financial reports through the State official web site. The data were analyzed through a descriptive analysis method such as mean,standard deviation, skewness, kurtosis, minimum and maximum values. This analysis was done with the aid of E-Views statistical package. From the data gathered, we found that recurrent expenditure (REX) has the highest mean (₦162.55 billion), indicating that a large portion of government spending goes to recurrent activities. Capital Expenditure (CAPEX) averages ₦93.13 billion, which is significantly lower than recurrent spending. Capital Expenditure (CAPEX) also has a very high standard deviation (₦91.51billion), showing large fluctuations in capital spending over the years. Recurrent Expenditure (REX), Capital Expenditure (CAPEX), and External Debts (EXD)are positively skewed, meaning there are some very high values in later years, especially 2023–2024. Domestic Debts (DOD) is slightly negatively skewed, meaning the distribution is fairly balanced. Capital Expenditure (CE) and External Debts (EXD) show leptokurtic distribution (kurtosis > 3), meaning the data has heavy tails and extreme values. Recurrent Expenditure (REX) (p = 0.0418), CE (p < 0.01), and EXD (p < 0.01) are not normally distributed. The findings clearly demonstrate that greater proportion of Bayelsa State Government debt financing is on recurrent expenditure while capital expenditure that would have giving rise to economic growth and development is relegated, thereby hinder sustainability of the debt financing. Based on the findings, we recommended that Bayelsa State should establish a robust debt management office with the mandate to conduct risk assessments, track obligations, and advise on sustainable borrowing limits; and should prioritize capital projects with high returns. Therefore, government borrowing should focus on infrastructure that promotes economic diversification in agriculture, tourism and development of small and
medium enterprise (SMEs) and digital infrastructure.