IIARD International Institute of Academic Research and Development

INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT (IJEFM )

E-ISSN 2545-5966
P-ISSN 2695-1932
VOL. 4 NO. 1 2019

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Impact of External Debt on the Growth of the Nigerian Economy

Mboto, H. W. & Edom, E. O.

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Abstract

External debt is a very important area in any country for boosting the economic activities. It is contradictory whether external debt stimulates economic growth or hinders growth. Some researchers found positive relationship, some negative and some no significant relationship between external debt and economic growth for different economic conditions. This study examined the impact of external debt on the growth of the Nigeria economy, using time series data from 1980 – 2013. The objectives of the study were to ascertain the relationship between short-term eternal debt and the performance of the Nigerian economy and to ascertain the effect of medium and long-term external debt on the growth of the Nigerian economy. To achieve the above objectives, the study employed the ordinary least squares (OLS) to obtain estimates of the parameters of economic relationship from statistical observations. The quantitative results based on this method showed that short-term external debt has a negative impact on the growth of the Nigerian economy. Furthermore, the result showed the existence of a negative and inverse relationship between medium and long-term debt and economic growth in Nigeria. Based on the findings, it was recommended that since external debts are meant to boost the economic growth and development of the debtor country and improve the standard of living of the citizenry, the Nigerian government should always consider the debts as means to long-run development, not just for solving short-run problems, as this will affect the amount of resources to be generated to pay back the debts at maturity. The negative impact of medium and long-term external debt on economic growth in Nigeria calls for appropriate policy actions to be taken to reverse this trend. There is need for the Nigerian government to probe the reasons behind the non-contribution of external debt to GDP growth of the country so as to unveil the bottlenecks and correct them. Finally, government should ens

keywords:

External debt, Debt management, Debt overhang, Debt Management, Fiscal deficit, Debt forgiveness, Economic growth.

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