Impact of External Debt and its Services Burden to Economic Growth in Africa: Econometric Evidence from Nigeria 1990-2016

Abstract

Nigeria as a nation falls under the classification of the highly indebted poor countries (HIPCS). Countries that fall under this have continued to experience problems in managing and servicing their huge stocks of external debt. The relatively high level of Nigeria’s external indebtedness and rising debt burden despite effort by different government to pay off or receive debt fugitiveness has a serious implication on the country’s development and suitability initiatives. This work empirical analyzed the impact of external debts on the economic growth in Nigeria, 1990-2016. The objective of this study is to assess the impact external debts on the economic growth in Nigeria and to determine the impact external debts service to gross domestic products (GDP). The study made use of ordinary least square regression model for short run and Johansson cointegration for long run relationship, Result reveals that external debt positively and significantly impacted on economic growth of Nigeria but external debts services negatively and significantly impacted on economic growth in Nigeria. The findings of the study show that Nigeria external debt is play significant roles in improving economic growth of Nigerians but accumulation of external debt services has been rising over the years with debt burden indicators increase steadily in the 1990s and early 2016,even after the Paris debt relief granted to Nigeria. This confirms that the existence of an external debt service over time has been a problem that refused to be arrested in Nigeria and must be carefully handled to enjoy the dividend of external debt as a package.