The study interrogated the rationale behind the federal government’s continued reliance on Keynesian fiscal policy prescriptions of deficit financing as a way of spurring sustainable economic growth in a developing economy like Nigeria; especially when such ideology seemed to contrast sharply with the realities of dwindling growth indices. Thus, this study examined the influence of public debts on the crowding-out effect of private domestic investment in Nigeria from 1986 to 2021. The research used the autoregressive distributed lag (ARDL) model in the analysis. Data obtained from the Central Bank of Nigeria statistical bulletin, volume 32, 2021 on external debt, external debt service, domestic debt, domestic debt service, interest rate, and exchange rate were estimated in the study. The results indicated that external debt and external debt servicing had significant negative effects on private domestic investment; while domestic debt exerted an insignificant positive influence on domestic investment. The result implies that servicing of external debt crowds out private domestic investment in Nigeria. Hence, the government should curtail future contraction of external debt, as any further external debt contraction would lead Nigeria into debt overhang, where future borrowing would almost be impossible for the country.