External Debt and Nigerian Economic Growth Connection: Evidence from Autoregressive Distributed Lag Approach

Abstract

External Debt and Nigerian Economic Growth Connection: Evidence from Autoregressive Distributed Lag Approach ONAKOYA, Adegbemi Babatunde FCA PhD, OGUNADE, Ayomide Olayinka Abstract This study examined the impact of external debt in bridging the gap resource required for economic growth in Nigeria. After preliminary evaluation of the data which indicated the non-normality of all the variables, the research deployed the Autoregressive Bounds testing method Distributed Lag (ARDL) method using the Ordinary Least Squares technique. Evidence of long run association was reported. The follow-up error correction mechanism found out that 45 present of disequilibrium errors are corrected after short run shock. External debt is negatively related to economic growth. On the average, one per cent increase in export will decrease the real GDP by 0.25 per cent in the long run. Although statistically significant at 1 per cent it did not fill savings and/or external finance gap. Furthermore, the pairwise granger causality test showed that external debt does not cause economic growth at 5% level of significance. The study recommended that adequatemeasures be put in place to ensure that borrowed funds are expended on development-promoting capital projects. In addition, appropriate institutional checks and balances on government fiscal performances are prerequisite for analyzing and managing public investment projects Full Text: PDF DOI: 10.15640/jeds.v5n1a7