The Impact of External debt on Economic Growth in Nigeria

This study investigates the contribution of external debt to the economic growth of Nigeria. The study employed data from 1970 to 2010 which were sourced from Statistical Bulletin of Central bank of Nigeria and Annual Reports of the Debt Management Office. It used real gross domestic product as the proxy for economic growth being the dependent variable and external debt, debt service payment, export, inflation and exchange rate as the explanatory variables. The augmented Dickey Fuller Unit Root test and Johansen Co-integration test are used to ascertain the Stationarity and the long run equilibrium relationship between the variables respectively. The econometric technique of Ordinary Least Square (OLS) was used for the data analysis. The findings of the study reveal that external debt contributes positively to the economic growth of Nigeria. Therefore, the study recommends that external borrowings should be channeled to the real sectors of the economy for the impact to be felt in the country.

2019

This study empirically examined the effect of external debt on economic growth in Nigeria under the period of 37 years (1981-2017). The study specifically examined the influence of external debt, external debt service payment and exchange rate on economic growth proxy as real gross domestic product. The study employed least square econometric technique to ascertain the relationship between external debt variables and economic growth in Nigeria. The study found that external debt and external debt service payment have negative effect on economic growth while exchange rate has positive effect on economic growth in Nigeria. The coefficient of multiple determinations (R) showed that approximately 77% of variations in economic growth are explained by the explanatory variables (EXTD, EXTDS and EXR) while the remaining 23% is accounted by factors not specified in the model. However, The Durbin Watson correlation test indicated that there is positive autocorrelation in the model which impli...

2020

The study was aimed at exploring the effect of external debt burden on economic growth in Nigeria. For the purpose of estimating the variables under study, this uses a multiple regression (OLS) model. The data is firstly tested for stationarity using the Augmented Dickey-Fuller (ADF) tests. In order to test for co-integration, the Johansen co-integration technique is used for normality test (Jarque-Bera) and serial correlations were used. The variables are made up of real GDP, money supply and external debt. The result revealed that external debt burden had a negative and insignificant effect on the Nigeria economic growth (coefficient = -1.31, p-value = 0.27). Based on the findings the study recommends alternative sources of government revenue to be utilised fully for this will minimize over dependence of government on foreign debt and therefore foster economic growth. JEL: F30, F34, F40 Article visualizations:

2013

The rationale for this paper is to establish the relationship between economic growth, external debt and domestic debt in Nigeria. Debt has become inevitable phenomenon in Nigeria, despite its oil wealth. This paper therefore is set to investigate the impact of external debt, and domestic debt on economic growth in Nigeria between 1970-2010 through the application of Ordinary least square method to establish a simple relationship between the variables under study, Augmented Dickey-Fuller technique in testing the unit root property of the series and Granger causality test of causation between GDP, external debt and domestic debt. The results of unit root suggest that all the variables in the model are stationary and the results of Causality suggest that there is a bi-directional causation between external debt and GDP while no causation existed between domestic debt and GDP as well no causation existed between external debt and domestic debt. The results of OLS also revealed that ext...

Journal of African Union Studies, 2019

External debt may help or hurt the country depending on how it is used. Thus, this paper focused on the impact of external debt on economic growth in Nigeria from 1980 to 2017. Secondary data on real gross domestic product, external debt, external debt service and exchange rate were sourced from CBN statistical bulletin. The Augmented Dickey-Fuller unit root test and Autoregressive Distributed Lag techniques were used as the main analytical tools. The result of the unit root test revealed that the variables were stationary at order zero and one, which satisfied the requirement to employ the ARDL Bounds testing approach. The ARDL Bounds test revealed the existence of long run relationship among the variables. Furthermore, the result revealed that external debt and external debt service have negative and significant relationship with economic growth in Nigeria both in the long run and short run. However, exchange rate has positive and significant relationship with economic growth in Nigeria during the period of study both in the long run and short run. In conclusion, debt is an important development resource but its misuse can be disastrous as had been the Nigerian experience before it got out of the debt trap in 2005. Therefore, government should ensure that the terms of borrowing and the projects for which the borrowed funds are put should be those that benefit the economy and the people. Government should also ensure that debt proceeds are efficiently managed so that Nigeria can avoid a repeat of the ugly history of debt overhang.

2022

The study examined the impact of external debts on economic growth in Nigeria between 1986 and 2019. The specific objectives of this study were to: examine the impact of external debt stock on economic growth in Nigeria; assess the impact of external debt servicing on economic growth in Nigeria and investigate the extent to which external debt interest has impacted on economic growth in Nigeria. It was discovered that debt is synonymous to underdevelopment, poverty, unemployment which has led to low living standard of the people and Nigeria's huge debt stock has prevented it from embarking on higher domestic investment which would lead to higher growth and development which is a major problem to Nigeria. The findings shows that Nigeria's economic growth has been adversely but significantly affected by rising external debt servicing and the study recommended that external debt should be effectively utilize for sustainable development and diversification of Nigeria's economy will reduce the rate of external debt. The study adopted the ex-post facto research design being of secondary nature and was used to test the hypotheses. Descriptive Statistics, Unit Root Test, Co-integration, Auto-regressive Distributive Lag and Error Correction Mechanism estimates, were used to estimate and to test the impact of external debt on economic growth in Nigeria were demonstrated.

External debt is found to be a driver of economic growth if properly managed but its servicing rather than repayment is an inhibiting factor to economic growth. This paper examined the relationship between external debt and economic growth in Nigeria for the period of 1981-2014. The study used both descriptive and econometric tools. The analysis of unit root was performed on each of the variables incorporated in the model and the result showed that, all the variables were stationary at level. The regression results showed a significant relationship between external debt and economic growth in Nigeria. However, external debt stock impacted positively while external debt service impact negatively on the annual growth rate of the Nigerian economy both in the long run and the short run. Thus,

Theory, methodology, practice, 2024

This paper examines the relationship between external debt and economic growth over the period 1981-2021 in Nigeria using the ARDL econometric technique. As economic growth is elusive amid a high and increasing stock of external debt, the country is on the verge of losing access to international financing. Thus, the problem provokes raging discussion on whether, or not, external debt is growth-enhancing in Nigeria. As such, in an attempt to contribute to the discussion and proffer a solution to the problem, this paper builds on an earlier study. Consequent upon preliminary diagnostics, a oneway causality is established to run in a specific pairwise relationship as each of external debt and domestic investment Granger causes economic growth. Moreover, following the affirmation of the long-run relationship among the variables, estimation results reveal an inverse relationship between real interest rate and economic growth in the short-run. The results further establish that external debt impacts negatively, as against openness to trade and domestic investment averagely impacting positively, on economic growth in both the short-run and long-run. In essence, if it becomes pertinent for the country to borrow for growth-enhancing investments, the government is advised to borrow at a zero rate of real interest.

International Journal of Business and Management, 2011

This study investigates the relationship between Nigeria's external debt and economic growth, between 1975 and 2006. The choice of period was guided by data availability and the the escalation of Nigeria's external debt. Econometric evidence revealed stationarity of the variables at their first difference while the Johansen cointegration approach also confirms the existence of one cointegrating relationship at the 1 percent and 5 percent level of significance. In addition, error correction estimates revealed that external debt has negative relationship with economic growth in Nigeria. For example, a one per cent increase in external debt resulted in a decrease of 0.027 per cent in Gross Domestic Product, while a 1 per cent increase in total debt service resulted to 0.034 per cent (decrease) in Gross Domestic Product. These relationships were both found to be significant at the ten per cent level. In addition, the pairwise Granger Causality test revealed that uni-directional causality exists between external debt service payment and economic growth at the 10 percent level of significance. Also, external debt was found to granger cause external debt service payment at the 1 percent level of significance. Statistical interdependence was however found between external debt and economic growth. In order to ameliorate the negative influence of external debt on economic growth, debt accumulation for projects must be matched with the timing of repayment. Nigeria must be concerned about the absorptive capacity. Consideration about low debt to GDP, low debt service/GDP capacity ratios should guide future debt negotiations. Finally the portfolio of debt must be diversified in terms of sources and types to avoid harmful concentration and a reoccurrence to the past.

IOSR Journal of Economics And Finance (IOSR - JEF), 2019

The rationale for this Research work is to establish the relationship between economic growth, external debt and internal debt in Nigeria. Debt has become inevitable phenomenon in Nigeria, despite its oil wealth. This paper therefore is set to investigate the empirical analysis of the impact of external debt and internal debt on economic growth in Nigeria between 1986-2013 through the application of Ordinary least square method to establish a simple relationship between the variables under study, Granger causality test of causation between GDP, external debt and domestic debt, chow break point. the results of Causality test suggest that there is a bi-directional causation between external debt and GDP while no causation existed between domestic debt and GDP as well no causation existed between external debt and domestic debt. Also the chow break point test revealed that there are no breaks at specified breakpoints in the variables. The results of OLS also revealed that external debt possessed a negative impact on economic growth while internal debt has impacted positively on economic growth (GDP). A major policy implication of this result is that concerted effort be made by policy makers to manage the debt effectively by channelling them to productive activities (real sector) so as to increase the level of output in Nigeria, hence achieving the desire level of growth.

2017

The study seeks to determine the effect of external debt on economic growth in Nigeria. Specifically, the study examines whether external borrowings and its major determinants like exchange rate, gross fixed capital formation and inflation rate have supported the growth of the Nigerian economy. The parameters of the model were estimated using the ordinary least squares method. The robustness of the result was enhanced using the generalized least squares technique. The result shows evidence of significant positive correlation between economic growth and the explanatory variables namely external debt, exchange rate and inflation rate. A negative correlation was however observed between economic growth and gross fixed capital formation. The regression estimates for both the ordinary and generalized least squares tests show significant positive impact of external debt, exchange rate and inflation rate on economic growth. The results also show non-significant negative effect of gross fix...

INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT

This study examined external debt burden and economic growth in Nigeria. Accordingly, the main objective of the study is to investigate the impact of external debt burden on economic growth in Nigeria, using the econometric analytical technique. Annual time series data were sourced from the Central Bank of Nigeria Statistical Bulletin. Economic growth was measured by gross domestic product (GDP) while external debt burden was represented by external debt stock and debt service payment. The bound testing and Autoregressive Distributed Lag model estimation techniques were employed for the analysis. The study found that external debt and debt service payment have significant and negative effect on economic growth in Nigeria. The study recommends that; government should restructure her external debt management by increasing the debt expenditure to capital project that can easily translate to economic growth and development. Debt management office should put up strategies like debt reneg...

Abuja Journal of Banking and Finance. Vol.1 July 2013 Article, 2010

External debt is one of the channels by which countries finance their deficits and carry out economic projects that are capable of increasing peoples' standard of living, promote sustainable economic development and an important resource needed to support sustainable economic growth Countries however run into debt crisis in the presence of growing level of external debt relative to GDP and export. Several studies have carried out on the relationship between external debt and economic growth in Nigeria with mix result. This study examines the actual rate of affair. Econometric method was employed in the analysis of data Normality test, unit root test, and co-integration test were conducted all in a bit to ensure that the resultant model estimates produce reliable regression results Findings from the study reveals that debt is not only associated with economic growth, but it also impacts positively on the growth effort of the economy most especially after debt forgiveness. However, the study recommends the need for government to imbibe the culture of channeling external debt into productive resources that are capable of generating significantly high return which can be used to offset the debt without necessarily paying debt from other sources that could otherwise be used to finance development projects.

This study investigated the impact of external debt and government expenditure on the economic growth of Nigeria between 1981 and 2011. To achieve this, secondary data were obtained from the Central Bank of Nigeria (CBN) Statistical Bulletin and the National Bureau of Statistics (NBS). In order to reduce the problem of stationarity usually associated with time series data, the data were subjected to the Augmented Dickey-Fuller test (ADF) and it found all variables to be integrated of order [I(I)] at first difference. Relevant econometric models such as the Johansen Co-integration test was employed to ascertain the long run relationship of the variables and also the Error Correction Model to estimate both the long and short term effects of the variables. The Jarque–Bera test which is a goodness of fit test was also conducted to determine whether the sample data had the skewness and kurtosis matching a normal distribution. The result showed a positive long run relationship between External Debt Stock (EXD), Government Expenditure (GEX) and economic growth proxy by GDP. It concluded that a unit increase in EXD and GEX drove GDP upwards by 65.6% and 84.25 % respectively. However, the relationship was found to be negative in the case of Debt Service Payment (DSP) where each unit increase caused a 98.76 % fall in GDP. In the short run the result revealed that Debt Service Payment (DSP) and Government Expenditure (GEX) both had a negative relationship with GDP. It held that each unit increase in both variables led to a 58.93 % and 18.92 % fall in GDP respectively. A positive short run relationship was however found in the case of External Debt Stock (EXD) which led to a 45.71 % rise in GDP. The study recommended that debt management strategy should be put in place continuously as part of the macroeconomic policies of government and the Debt Management Office, match project with timing of repayment, monitor the absorptive capacity of the economy for foreign capital and diversify the portfolio of debt in terms of sources and types to avoid concentration of debt service imperatives. The study also recommended that in the short run, government should ensure that it allocate her expenditure in a productive manner so as to ensure resultant effects that are capable of stimulating economic growth.

This study examines the impact of external debt on economic growth in Nigeria. Controversies over the direction and significance of the relationship between the two macroeconomic variables have long been observed in economics and development literatures. Theoretical and past empirical studies on the subject have yielded inconclusive results. Time series data from 1970 to 2007 were analysed using the Granger causality test and the ordinary least square regression technique. Empirical investigation reveals a bi-directional causal relationship between external debt and economic growth. The results of the ordinary least square show that external debt has a significant negative impact on economic growth in Nigeria. Therefore, policies that will reduce or sustainably manage the debt ratio in Nigeria should be proactively pursued as they are an effective way of promoting economic growth and development in Nigeria.