Foreign Debt Accumulation and Sectoral Infrastructure Development in Nigeria: A Time Series Analysis

UKEDJERE Stephen; EFEMIEMIE Vivian; EHIEDU; Victor C; PhD

doi:10.56201/jbae.vol.11.no9.2025.pg18.40

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Foreign Debt Accumulation and Sectoral Infrastructure Development in Nigeria: A Time Series Analysis

UKEDJERE Stephen, EFEMIEMIE Vivian, EHIEDU, Victor C, PhD

Abstract

This study empirically investigates the relationship between foreign debt accumulation and sectoral infrastructure development in Nigeria with a focus on the manufacturing sector, proxied by Manufacturing Sector Gross Domestic Product (MSGDP). Using annual time-series data spanning 1994–2024, the research adopts an ex post facto design and applies the Autoregressive Distributed Lag (ARDL) estimation technique to capture both the short-run dynamics and long- run relationships. The explanatory variables include External Debt Stock (EDS), Debt Service Ratio (DSR), Multilateral Share of External Debt (MSED), and Bilateral Share of External Debt (BSED). The short-run results reveal that immediate variations in external debt, debt servicing, and debt composition do not significantly influence manufacturing sector GDP, although lagged external debt demonstrates a marginal negative effect, underscoring the delayed cost implications of debt accumulation. The error correction mechanism confirms a significant long- run adjustment process, with 32% of short-run disequilibrium corrected annually. In the long- run, external debt stock exerts a positive and significant effect on manufacturing output (coefficient = 0.5322, p = 0.0003), suggesting that foreign debt, when channeled into productive sectors, can stimulate industrial and infrastructural growth. Conversely, DSR, MSED, and BSED remain negative and statistically insignificant, indicating that high debt servicing burdens and the structural composition of debt undermine the efficiency of foreign borrowing in enhancing sectoral development. The study concludes that while debt stock can foster growth-enhancing infrastructure in Nigeria’s manufacturing sector, debt service obligations and the composition of borrowing significantly reduce these benefits. It recommends policies focused on prudent debt management, diversification of financing sources, and reallocation of debt proceeds toward

Keywords

Foreign DebtExternal Debt StockDebt Service RatioMultilateral DebtBilateral

References

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Foreign Debt Accumulation and Sectoral Infrastructure Development in Nigeria: A Time Series Analysis

Abstract

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References

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