IIARD International Institute of Academic Research and Development

IIARD INTERNATIONAL JOURNAL OF BANKING AND FINANCE RESEARCH (IJBFR )

E-ISSN 2695-1886
P-ISSN 2672-4979
VOL. 5 NO. 1 2019

---

Nigeria’s External Borrowing and Economic Growth (1981-2017): An Auto-Regressive Distributed Lagged (ARDL) Model Approach

Prof. B. O. Osuka & Ezedike G. O.

---

Abstract

This study empirically examined external borrowing sources and economic growth in Nigeria employing time series data from the Nigerian Bureau of Statistics, Debt Management Office and Central Bank of Nigeria Statistical Bulletin for period of 1981 to 2017. Data were collected on the Nigerian external financing sources namely; Multilaterals (MFIs), London Club of Creditors (LCCs), Paris Club of Creditors (PCCs), Promissory Notes (PNs) and Others which served as the exogenous variables and the Real GDP as the endogenous variable. The data was modeled and analyzed using Autoregressive Distributive Lag (ARDL) Bound test and Cointegrating Long Run technique. Other diagnostic tests as; test of Normality, Autocorrelation test, Heteroskedasticity test and Breusch-Godfrey Serial Correlation LM Test were also carried out and they confirmed the reliability of the model. The study found significant short run and long run relationship between external borrowing and economic growth in Nigeria; In the short run, borrowing from the Paris Club and London Club of Creditors made insignificant negative contribution, Multilateral Financial Institutions and Others made significant negative contribution while, Promissory Note was insignificant positive contributor. On the long run relationship, only borrowing from the Multilateral Financial Institutions made a significant positive contribution, borrowing from Paris Club and London Club of Creditors, Promissory Notes and Others were insignificant negative contributors. The model disequilibrium had 26.90% annual speed of adjustment. The study therefore recommends that Nigeria’s external borrowing should concentrate more on Multilateral Financial Institutions to achieve significant positive impact on economic growth. Further consideration may be placed on Promissory Note that made positive contribution on the short run. It also recommends prudent utilization of the borrowed funds.

keywords:

External debt, Economic growth, Nigeria, Relationship, Long Run, ARDL

---

References:

Adegbite E. O, Ayadi. F. S. and Ayadi O.F. (2008) The Impact of Nigeria’s External Debt on
Economic Development. International journal of emerging market, 3(3):285-301 July
2008.https://www.researchgate.net/publication/235679833_The_Impact_of_Nigeria
27s_External_Debt_on_Economic_Development

Adepoju, A. A, Salau, A. S, Obayelu, A. E. (2007). The effects of external debt management
on sustainable economic growth and development: Lessons from Nigeria. Econ papers.

Adesola, W.A. (2009). “Debt servicing and Economic Growth in Nigeria: An Empirical
Investigation” Global Journal of Social Sciences 8

Afolabi, A. (1991) Monetary Economics. Ibadan, Intec Printers LTD.

Ajide, K. B. (2014) Determinants of economic growth in Nigeria. CBN Journal of Applied
Statistics Vol. 5 No.2 (December, 2014)
https://www.cbn.gov.ng/out/2015/sd/determinants%20of%20economic%20growth%
0in%20nigeria.pdf

Akram, W. (2010). “Impact of Public Debt on the Economic Growth of Pakistan.” Centre for
Poverty Reduction and Social Policy Development, Islamabad.

Anyanwu, J. C. (1993) Monetary Economics: Theory, Policy and Institutions. Onitsha,
Hybrid Publishers, Ltd.

Amassoma, D. (2011). “External Debt, Internal Debt and Economic Growth Bound in
Nigeria using a Causality Approach” Current Research Journal of Social Sciences 4
CBN, (2013) understanding monetary policy series No 36.

Aminu U. S (2017) Nigeria’s debt management solutions. DailyTrust November 20, 2017
https://www.dailytrust.com.ng/nigeria-s-debt-management-solutions.html

Dave G. (2013) Econometrics Beat: A resource for econometrics students & practitioners
Retrieved on 8th October, 2018 from
https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=4&cad=rja&
uact=8&ved=2ahUKEwjskKqsyI7eAhXIIMAKHaxSAHkQFjADegQIAxAB&url=htt
ps%3A%2F%2Fdavegiles.blogspot.com%2F2013%2F06%2Fardl-models-part-ii-
bounds-tests.html&usg=AOvVaw3LvKgr3JkOE4wl6qtuwBRl

Boldeanu, F. T and Constantinescu, L (2015) The main determinants affecting economic
growth. Bulletin of the Transilvania University of Bra?ov Series V: Economic Sciences
• Vol. 8 (57) No. 2 - 2015.
http://webbut.unitbv.ro/BU2015/Series%20V/BILETIN%20I/38_Boldeanu%20Const
antinescu.pd f

Dwivedi, D. N. (1980) Managerial Economics (7th, edition). India, Vikas Publishing House,
PVT Ltd.

Egungwu I C (2018) Impact of External Debt on Human Capital Development in Nigeria.
International Journal of Advance Research and Innovation, Volume 6 Issue 1 (2018)
47-57. http://ijari.org/CurrentIssue/2018Volume1/IJARI-MG-18-03-101.pdf

Haller, P. A. (2012). Concepts of Economic Growth and Development. Challenges of Crisis
and of Knowledge. Romanian Academy Branch of Iasi, ROMANIA.
http://www.ugb.ro/etc/etc2012no1/09fa.pdf

Ijirshar, V. U, Joseph F. and Godo M. (2016), The Relationship between External Debt and
Economic Growth in Nigeria. Int. Journal Econ. Mgt. Sci. 6: 390.

IMF (2014) External Debt Statistics; guide for compilers and users. Sourced on 2nd september,
2018 from
https://unstats.un.org/unsd/nationalaccount/docs/External_debt_statistics_guide.pdf.

Lawal I. A, Bibire M. B, Adegbola O. O, Johnson O. A (2016) External Debt and Economic
Growth: Evidence from Nigeria. Acta Universitatis Danubius. Œconomica, 12, (6)
(2016)
http://journals.univ-danubius.ro/index.php/oeconomica/article/view/3655/3744

Nalizia, E. E. (nd) Economic Growth and Economic Development: Concepts and Measures
from
http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.918.2251&rep=rep1&ty
e= pdf

Norman A (2015) ARDL with Cointegrating Bounds using EVIEWS 9. Retrieved on 8th
October, 2018 from
https://webcache.googleusercontent.com/search?q=cache:B3UnYF9NrnQJ:https://n
manarshed.wordpress.com/2015/05/02/ardl-with-cointegrating-bounds-using-eviews-
9/+&cd=2&hl=en&ct=clnk&gl=ng

Nwankwo, A. E. (2016) Understanding Nigeria’s Debt Management Strategy. Thisday
December 5, 2016.
https://www.thisdaylive.com/index.php/2016/12/05/understanding-nigerias-
debt-management-strategy/

Mba, U. and Agu (2016). Impact of External Debt on Economic Growth in Nigeria: An ARDL
Bound Testing Approach. (ME16Dubai October Conference) ISBN: 978-1-943579-27-
3 Dubai-UAE. 14-16 October, 2016.PaperID:DF601
http://globalbizresearch.org/Dubai_Conference_2016_Oct/docs/doc/1.%20Global%20
Business,%20Economics%20&%20Sustainability/DF601.pdf.

Ogege, S. & Ekpudu, J. E. (2010), The Effect of Debt Burden on the Nigerian Economy.
Journal of Research in National Development 8(2). December.

Ojo, M. O, Sulaiman, L. A. (2012). External Debt, Economic Growth and Investment in
Nigeria. European Journal of Business and Management11: 67-75

Olasode, O. S, Babatunde, T. S (2016), External Debts and Economic Growth in Nigeria:
An Empirical Study Using Autoregressive Distributed Lag Model. Bus Eco J 7:239.

Udeh S. N, Ugwu J. I. and Onwuka I. O. (2016), External Debt and Economic Growth:
The Nigeria Experience. European Journal of Accounting Auditing and Finance
Research 4, (2), 33-48, February 2016

Onwuamaeze, D. (2017) Nigeria’s rising debt profile, The Economy (December, 2017) 1 (71)

Pattilo, C. Ricci L, Poirson, H. (2001). Non-linear Impact of External Debt Growth. Journal
of Policy Modeling 31: 272-288

Rasheed, A. O and Olusola, O. O (2016) Management of Nigeria external debt (Mned) and
economic growth. JORIND 14(1) June, 2016. ISSN 1596-8303.
http://www.transcampus.org/JORINDV14JUN2016/11.pdf

Salihu, A. (2016) Analyses of long run and short run models Econometrics Workshop,
Nigeria, Centre for Econometric & Allied Research, University of
Ibadan, DOI:10.13140/RG.2.2.35204.53121 Retrieved on 8th October,
2018 from
https://www.researchgate.net/publication/315785982_Analyses_of_long_run_and_sh
ort_ run_models

Shearer R. A. (1961). The concept of economic growth. Sourced on 2nd September,
2018.from,
https://deepblue.lib.umich.edu/bitstream/handle/2027.42/75479/j.14676435.1961.tb00
368.x.pdf?sequence=1&isAllowed=y
The Economy (November, 2017) 1 (70)

Udeaja, A. E and Obi, K. O (2015) Determinants of Economic Growth in Nigeria: Evidence
From Error Correction Model Approach. Developing Country Studies.
ISSN 2224-607X (Paper) ISSN 2225-0565 (Online) Vol.5, No.9, 201.
https://www.researchgate.net/publication/307571134Determinants_of_Economic_Gr
wtin_Nigeria_Evidence_from_Error_Correction_Model_Approach

World Bank (2017) GDP by Country | Statistics from the World Bank, 1960-2017
\http://nigeria.opendataforafrica.org/mhrzolg/gdp-by-country-statistics-from-the-
world-bank-1960-2017?country=Nigeria

World Bank Publications (2004). World Development Indicators.

DOWNLOAD PDF

---

Back