This study examines the association between debt overhang and output stimulation in Nigeria for a period of 37 years extending from 1981 to 2017, utilizing time series data sourced from the statistical bulletin of Central Bank of Nigeria. Public domestic bank debit outstanding, public domestic non-bank debt outstanding, public foreign multilateral debt outstanding, and public foreign informal debt outstanding was employed as indices of debt overhang, with real gross domestic product utilized as proxy of output stimulation. The study employed ex-post facto research design. The augmented Dickey-Fuller unit root test carried out revealed that all the variables are integrated of order one. The Johansen cointegration test carried out divulged the presence of long run relationship among employed variables. From the result of the study public domestic bank debt outstanding, public domestic non-bank debt outstanding, and public foreign multilateral debt outstanding have positive and significant impact on real gross domestic product, while public foreign informal debt outstanding exerts a positive and insignificant impact on real gross domestic product. The study recommended that the Federal government should sustain current level of debt or decrease the level of debt and also ensure that fund sourced from external and domestic sources are channelled to the designated projects.
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