Impact of External Debt on Economic Growth in Nigeria

Abstract

This study examined external borrowing and economic growth in Nigeria covering the period 1981 – 2019. The main objective of the study is to ascertain the impact of external borrowing on economic growth in Nigeria. Times series data on GDP, external debt, exchange rate, external debt servicing payments and inflation were extracted from the Central Bank of Nigeria (CBN) statistical bulletin 2018 was used for the study. The method of data analysis and evaluation were the unit-root test which was used to ascertain the stationary status of the variables, the linear regression with the application of Ordinary Least Squares (OLS) technique and the Granger causality analysis. The major findings of the study are that all the variables are stationary at first difference I(1), external debt has a negative and insignificant relationship with economic growth in Nigeria ( = -0004912, p-value = 0.6944 > 0.05) and there is no causality relationship existing between external debt and economic growth in Nigeria. The study therefore recommends that the federal government should acquire external debt largely for economic reasons rather than social or political reasons. This would increase the Gross Domestic Product (GDP) of the nation.