Abstract
Nigeria is confronted with the issue of limited capital and has to resort to foreign debt in order to augment domestic savings, balance of payment deficits, and shortfall in revenue which induce continuous raise in the debt stock at an alarming rate. In the light of this, this study assesses the impact of public debt on external reserve in Nigeria. The objectives of this study include the assessment of the trends and relationship between public debt and external reserve in Nigeria, using the Johansen cointegration and FMOLS technique on the secondary data from 1981 to 2013. The result revealed that public debt has a positive and significant effect on external reserve stock in the long run suggesting that the nation’s debt crisis can be attributed to both exogenous and endogenous factors such as the nature of the economy, economic policies, high dependence on oil, and swindling foreign exchange receipt. This study recommends that the federal government should employ more superior method to negotiate for fixed interest payment and varying amortization schemes, as well as seek multiyear rescheduling rather than year by year basis.
Highlights
Debt has no precisely fixed meaning but may be regarded essentially as that which a person or group of people legally owes another or an obligation that is enforceable by legal action to make payment for money owed to another [1]
Nigeria public debt and broad money supply exert a long run positive and significant effect on external reserve while nominal exchange rate was insignificantly related to external reserve
This study shows the extent to which the Nigerian’s outstanding public debt reflects on the economy’s external reserve from the time of the outbreak of oil crisis in 1981
Summary
Debt has no precisely fixed meaning but may be regarded essentially as that which a person or group of people legally owes another or an obligation that is enforceable by legal action to make payment for money owed to another [1]. A debt is the disbursement of funds made available to a needy entity (or nation) by a wealthy entity or institution, for development and consumption purposes on certain terms of repayment. When a government borrows, the debt is noted as public debt, which can be incurred from domestic and international financial markets. Government borrowing within its boundaries is referred to as domestic debt, which is usually in the form of treasury bills and bonds, while that which is sourced externally from other nations or financial institutions is categorized as foreign or external debt. External debt refers to unpaid portion of foreign resources acquired from developmental purposes and balance of payment support, which are not repaid as they fall due. According to Ajibola et al [2], external debt is debt owed by a country to other countries or institutions abroad
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
