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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 debtEconomic growthNigeriaRelationshipLong RunARDL

References

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