External Debt and Economic Growth: Evidence from Nigeria

Lawal, A. I. and Babalola, Mabel Bibire and Otekunrin, A. O. (2016) External Debt and Economic Growth: Evidence from Nigeria. AUDŒ, 12 (6). pp. 179-194.

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Abstract

The study examined the impact of external debt on economic growth in Nigeria for the period 1981-2014 based on annual data sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin (various issues) and abstract of National Bureau of Statistics (NBS). The researcher examined the existence of Co-integration among the underlying variables using Auto-regressive Distributed Lag (ARDL) model after conducting preliminary statistical test to ascertain the normality of the variables as well as stationary of the data set using descriptive and unit root tests. The result of the ARDL test shows that a significant relationship exists between external debt and economic growth both at the long and short run. The study also examined the causality among the variables using Granger causality test and observed that no causality exist among the variables. The study therefore recommends that government should ensure that loans obtained are used to finance profitable projects that would generate reasonable amount of revenue to service the debts and also adequate record of debt payment obligations should be kept and debt should not be allowed to exceed a maximum limit in order to prevent debt overhang.

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