Analysis of External Debt Dynamics and Capital Accumulation in Nigeria; a Co-Integration Approach

Adamgbo; Suka Lenu Charles; Igbasra N. Felix

Analysis of External Debt Dynamics and Capital Accumulation in Nigeria; a Co-Integration Approach

Adamgbo, Suka Lenu Charles, Igbasra N. Felix

Abstract

When greater percentages of foreign reserves (Gross Capital Accumulation) are consumed in meeting external debt servicing, credit worthiness is eroded, causing reduction in access to external financial resources which impede economic growth rate. This study, examines the effects of external debt dynamics proxy by external debt stock (DS) and servicing (XDS) on the Nigeria external reserves (EXR) as a proxy for capital accumulation. The study spanned between 1981 to 2010 using the Nigeria time series data. The study used the correlation regression model to estimates the OLS, unit root, co-integration and ECM estimation techniques to explore the influence of the explanatory variables on the dependent variable. The result indicates presence of a negative relationship among our studied variables. Debts stock (DS) and servicing were found to account for significant changes in the Nigeria external reserves position up to 92% and was significant at 5% level. Applying the ADF test the variables were also found to be stationary at first difference. The Johansen test using both the trace and maximum Elgin statistics shows a stable long-run equilibrium relationship among the variable. The ECM coefficient confirms that EXR adjust fairly to the influence of (DS and XDS). Hence, there is therefore, need for government to curtail contracting foreign debt, the need for efficient management of external reserves to avoid looming risk of running out of capital stock

Keywords

External Debt StockExternal Debt ServicingCapital Accumulation/Stock.

References

Afifkhan, J, Syeda, B and Tahir, M. (2014). Finding the Impact of Foreign Debt Servicing on Per-Capital Income and Growth Rate; A Case Study Of Pakistan. African Journal of Marketing Management. Domar, E. (1946). Capital Expansion; Rate of Growth and Employment. Econometrics, Vol. 14. Engel, R.F and Granger, C.W.J. (1987). “Co-Integration And Error Correction Representation Estimation And Testing” Econometrical, 55, 251-276. Fapetu, O And Oloyode, J.A. (2014). “ (1960-2012). European Journal Of Business And Innovation. Research Vol 2 No 2 European Centre For Research Training And Development (Uk).[[ Granger C. W. J. And Newbolt, P. (1974). “Spurious Regression in Econometrics” Journal Of Economics 2 (2), 111-120.[ Harold, E.F. (1939). An Essay In Dynamic Theory Economic: Journal of Economic. Vol. 49. Karagol, E. (2010). The Causality Analysis of External Debt Servicing and GNP, The Case Of Turkey; University Of York, Department Of Economic And Related Studies Hoisington, York UK. Obesiki P,J, (2007). Servicing Currency, Composition and Uses of External Reserves. CBN Bulletin Vol. 31 (2). Obesiki, P, J, (2007). Foreign Exchange Management in Nigeria; Past, Presence and Future; CBN Economic And Financial Review Vol. 29. No. 1. Omoh, G. (2013).Using Our Reserves To Achieve Economic Growth And Development. Vanguard Newspaper August 13th 2012. Osuji, E.C. And Ebiringa, O.T. (2012) “Analysis of the Effect of External Reserves Management on Macro-Economic Stability of Nigeria. International Journal of Business Management And Economic Research Vol. 3 (6). Serieus, J., Sammy Y, (2001). Economic Growth, Export, External Debt Causality. The Case Of Asian Countries North-South Institute (Canada). Serieus, J., Sammy Y, (2001). The Debt Servicing Burden And Growth Evidence From Low Income Countries. The North-South Institute Working Paper (Canada).

Analysis of External Debt Dynamics and Capital Accumulation in Nigeria; a Co-Integration Approach

Abstract

Keywords

References

More Articles from IIARD INTERNATIONAL JOURNAL OF BANKING AND FINANCE RESEARCH