External Debt and Economic Growth: Evidence from Nigeria

Abstract

This study investigates the contribution of external debt to the economic growth of Nigeria. The study employed data from 1970 to 2010 which were sourced from Statistical Bulletin of Central bank of Nigeria and Annual Reports of the Debt Management Office. It used real gross domestic product as the proxy for economic growth being the dependent variable and external debt, debt service payment, export, inflation and exchange rate as the explanatory variables. The augmented Dickey Fuller Unit Root test and Johansen Co-integration test are used to ascertain the Stationarity and the long run equilibrium relationship between the variables respectively. The econometric technique of Ordinary Least Square (OLS) was used for the data analysis. The findings of the study reveal that external debt contributes positively to the economic growth of Nigeria. Therefore, the study recommends that external borrowings should be channeled to the real sectors of the economy for the impact to be felt in the country.

Keywords: External Debt, Debt Service Payment, Economic Growth, Real Gross Domestic Product.