Abstract
This study examined the structural break relationship between external debt and economic growth from 1985 to 2016 with a view to examine the effect of external debt relief on economic growth in Nigeria. The study used the ordinary least square technique. In addition, it employed the chow test and also adopted the similarity of error variances test in its analysis. From the results and analysis, it was revealed that external debt stock (EXD) is positively and insignificantly related to RGDP. It was concluded that the 2005 external debt relief did significantly caused a change in external debt, external debt service relations with economic growth in Nigeria. Based on these findings, the study suggested that external finance should be used only for projects of highest priority. Spending of external debt on productive self-liquidating investments must be strictly adhered to while projects to be financed with external loan must be properly appraised.
Highlights
The motive behind external debt is to boost economic growth and development of any nation but as a result of future high debt service payments, it poses a serious threat to the economy of that nation
Many studies have been conducted in Nigeria to investigate whether or not debt relief granted to Nigeria is effective in improving its economic growth(Fosu, 2007;Omotola and Saliub, 2011;Ekperiware and Oladeji, 2012).Bakare (2010) investigated whether or not debt relief granted to Nigeria is effective in improving its economic growth and development
This study examined the structural break relationship between external debt and economic growth from 1985 to 2016 with a view to examine the effect of external debt relief on economic growth in Nigeria
Summary
The motive behind external debt is to boost economic growth and development of any nation but as a result of future high debt service payments, it poses a serious threat to the economy of that nation. Base on the empirical analysis of (Elbadawi et al, 1997; Pattilo et al, 2004; Clements et al, 2003) that the debt-growth relationship follows a bellshaped curve where, beyond a certain threshold, the impact of debt on growth becomes negative This suggests that debt relief can reduce the debt stock below that peak threshold, which helps to reinstate the incentives to invest. The findings suggest that the debt relief has not led to high economic growth in Nigeria This result is similar to what were found in similar studies for some highly indebted countries, which have received debt relief. Research Methodology This study relies heavily on data collected from secondary sources covering the period 1985-2016 The choice of this period is because Nigerian external debt really began to mount within this period and the 1999 struggle for debt relief that came in 2005. From 1985 to2005 is the period preceding the October 2005 external www.cribfb.com/journal/index.php/asfbr
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