External Debt Management and Macroeconomic Performance of the Nigerian Economy, 1986 – 2011

Abstract

The study examines impact of external debt management on macroeconomic performance in Nigeria using data spanning 1986-2011 and employs an Ordinary Least Squares (OLS) technique. Four equations were modeled in which the independent variables include external debt (EDBT), debt service payment (DSP), balance of payments (BOP) and foreign direct investment (FDI). The dependent variables were per capita income (PCI), unemployment (UNEM) and literacy rate (LITR) for model 1, 2 and 3 respectively as well as of EDBT. The OLS results reveal that impact of EDBT, DSP and BOP on PCI is negative while FDI has a positive influence on PCI. Again, EDBT, DSP and BOP have positive determining influence on UNEM while that of FDI on UNEM is negative. Empirical results further show that impact of EDBT, DSP and FDI on LITR is positive while a negative relationship exists between LITR and BOP. Finally, impact of FDT and TOT on EDBT is negative and a positive relationship exists between GDP, EXR and EDBT. The study recommends among other things that government should ensure that any deal with the London and Parish Clubs and other creditors should be deals that will open Nigeria to greater trade and investment.

Key Words: External Debt, Debt Service Payments, Economic Performance, per capita income.