External Debt, Debt Servicing and Poverty Reduction in Nigeria: An Empirical Analysis

Abstract

This study utilizes co integration and regression analysis to investigate into the impact  of external debt and debt  servicing on poverty reduction in Nigeria using data  for the period  1980 to 2010. Specifically, three analysis were  undertaken, first, the time series properties of the concerned variables were ascertained with the help of the Augmented Dickey-Fuller (ADF) unit root procedures. Second, the long-run relationship among poverty reduction, debt –Income ratio, debt-service degree of openness, growth of agricultural value added, per capital income, inflation  rate and investment-income ratio was examined  in the context of the Johansen and Juselius (1990) framework. Thirdly, a multiple regression analysis  was employed  to examine  the impact of external debt  and debt servicing  on poverty reduction. The overall  results indicate  that both the  external debt  and debt servicing  cause poverty  in Nigeria. This finding suggests that government needs  to mobilize  domestic saving to replace external debt.

Key words: External Debt,  Debt Servicing , Poverty Reduction