External Debt and Macroeconomic Indicators: Time Series Evidence from Nigeria

Abstract

This study investigated the relationship between external debt and macroeconomic indicators in Nigeria. The objective was to investigate the effect of external debt on Nigerian macroeconomic indicators. The study used of time series data sourced from Central Bank of Nigerian statistical bulletin. Data were analysed using Statistical Package for Social Sciences. Macroeconomic indicators were proxy by real gross domestic product, inflation rate, unemployment rate and balance of payment while external debt was proxy by Nigerian external debt to London club of creditors, multilateral club of creditors, Paris club of creditors, promissory notes and external debt servicing. Ordinary least square method with the aid of statistical package for social sciences was used as data analysis method. The study found 71.3 percent while the R-square is 66.3 percent. External debt variables explained 68.6 percent variation on the dependent variable which is balance of payment. However, the beta coefficient of the variables found that all the independent variables have positive but insignificant effect on the dependent variable which is balance of payment, the study found that external debt explained 77.1 percent variation on Nigerian unemployment rate the beta coefficient of the variable shows that all the independent variables have positive relationship except Nigerian external debt with London club of creditors and found that 78.4 percent variation on Nigerian inflation rate while the coefficient shows that external debt with multilateral club, Paris club and Promissory note have negative relationship with Nigerian inflation rate while debt servicing and Nigerian external debt with London club of creditors have positive effect on Nigerian inflation rate. The study concludes that external debt has significant effect with Nigerian macroeconomic indicators. We recommend that external debt in Nigeria should be well utilized for better macroeconomic indicators.