External Debt Service Research Articles

Foreign aid, debt interest repayments and Dutch disease effects in a real exchange rate model for African countries

The international competitiveness of developing countries is integral to their economic development; hence understanding the main determinants of the real exchange rate is important. The empirical literature supports the Dutch disease hypothesis that foreign aid inflows significantly contribute to a real appreciation of African currencies, but these studies do not account for the downward pressure on the exchange rate from foreign currency payments. Using a panel of sub-Saharan African countries from 1980 to 2017, we test the hypothesis that the real exchange rate appreciation from aid inflows is moderated by interest repayments on external debt. Our findings suggest that one-third of the Dutch disease effect of aid inflows on the real exchange rate is offset by external debt interest repayments. These findings are important in showing that countries with external debt servicing obligations can mitigate the Dutch disease effect of aid inflows on competitiveness.

Attaining Economic Growth Through Financial Development and External Debts: Evidence from Emerging Economies

Current study examines whether in emerging countries, financial development (FD) and external debts (EXD) has an impact on the economic growth (EG) collectively by focusing on two main debt theories i.e., debt overhang theory by Krugman & Debt-Laffer curve. Annual data on external debts (EXD), financial development (FD), trade openness, inflation, capital formation, debt servicing, population growth and economic growth are derived from the “World Development Indicators” (WDI) from the year 1980 to the year 2019 for the emerging countries: Brazil, China, Indonesia, Mexico, South Africa, Turkey, Nigeria, Pakistan, Poland, Russia, Thailand. Autoregressive distributed lag (ARDL) model is used to estimate the long-run relationships among the variables in the model, and the effect of EXD on EG is determined using the pool mean group (PMG) model. This study shows the negative and significant relationship between external debt (EXD) and GDP growth and positive and significant relationship is found between financial development (FD) and EXD in the long-run. Similarly, in the long-run, Debt servicing, trade openness and inflation have a significant and negative relationship with GDP growth While population growth and gross capital formation has significant and positive correlation with GDP growth.

Does Public Debt and Investments Create Crowding-out Effect in Turkey? Evidence from ARDL Approach

The impact of public sector debt composition on the private sector is a matter of curiosity. This article explores the crowding-out effect of public debt and public investment on private investment in Turkey from 1975 to 2020, utilising the ARDL method. The findings reveal that public investment, public domestic debt stock, and external debt service create a crowding-out effect; on the other hand, the public external debt stock has a crowding-in effect on private sector investments. In this study, the crowding-out effect of public debt, which has not been directly related to private sector investments in the literature, is tried to be examined.

EXTERNAL DEBT AND AGRICULTURAL PRODUCTION IN NIGERIA

The motivation for this paper stems from the rising debt profile of Nigeria, especially the foreign component, and its implication on growth prospects. In that regards, the study sought to establish the linkages between external debt and growth in productivity, specifically focusing on the agricultural sector. The study thus analyzed the relationship between external debt and Nigeria's agricultural production from 2006 to 2021 using secondary data obtained from the Central Bank of Nigeria (CBN) statistical bulletin and the World Development Indicators (WDI). ADF unit root test and the (ARDL) bound testing approach to cointegration were utilized, to achieve the objectives of the study. The parameters displayed a long-term association in both the short and long - run, according to empirical results, which demonstrated that the variables were cointegrated. External debt stock (EDS) and agricultural production, as assessed by agriculture gross domestic product (AGDP), had a substantial positive association, indicating that EDS positively impacted agricultural growth and that higher EDS accelerated agricultural growth over time. To be precise, a rise in EDS of 1% produced an increase in AGDP of 0.14%. Euro bond stock and bilateral loans also revealed positive relationships while External Debt Service Payment and Multilateral loans revealed negative relationships with AGDP. According to this research, the government must consider the strategy of diversifying its economy via agricultural output seriously. To lessen the cost and unfavorable effects of an excessive reliance on foreign exchange from oil and its price volatility, it is necessary to diversify the sources of external debt servicing, particularly in the non-oil sector including agriculture, mining, industry, and industrial production.
 Keywords: Debt, Agriculture, Loans, Output, Nigeria.

Effect of Debt Servicing on External Reserves in Nigeria

The management of Nigeria's external reserves, a key indicator of the nation's financial health and ability to withstand economic shocks, is at the centre of this economic investigation. This study investigates the effect of debt servicing on external reserves in Nigeria from the first quarter of 2010 to the first quarter of 2023. An ex post facto research design was adopted for the study. Quarterly time series data for external reserves, external debt servicing, and domestic debt servicing were collected from the Central Bank of Nigeria statistical bulletin and Debt Management Office reports. Philip Perron test was used to test the stationarity of the data and the ARDL test was utilized to determine the presence of a long-run relationship. The Fully Modified Ordinary Least Squares technique was used to test the effect of debt servicing on external reserves in Nigeria. The findings showed that external debt servicing and domestic debt servicing have a significant effect on external reserves in Nigeria. The study recommends that the Nigerian government through the Debt Management Office should emphasize diversification in acquiring external debts by engaging with multiple creditors, including multilateral institutions, bilateral partners, and global financial markets. Also, a strong emphasis should be placed on enhancing domestic revenue mobilization efforts. This can be achieved through fair and effective tax policies, reducing tax evasion, and promoting investments in sectors(like the finance sector)that yield sustainable revenue streams. Increased domestic revenue can alleviate the need for extensive domestic borrowing, thereby reducing the strain on external reserves for domestic debt servicing.

Analysing the Incidence of External Debt Stocks and Exchange Rate Fluctuations on Economic Growth in Nigeria

The overdependence of Nigeria on external borrowing to finance capital projects amidst persistent fluctuations in exchange rate had posed challenges for economic growth in Nigeria. This study analysed the impact of external debt stock and exchange rate fluctuations on economic growth. Time series data on the variables were sourced from the world development index and the Central Bank of Nigeria from 1981-2021. The outcome of Zivot-Andrews indicated that all variables were integrated of order I(1), the Johansen cointegration confirmed the existence of long run relationship among the variables. The study found from the analysis of structural VAR that external debt stock and external debt service had significant negative impact on economic growth in Nigeria while exchange rate fluctuations positively impact on economic growth. However, the analysis of the transmission effect revealed that external debt stock negatively affects economic growth through exchange rate volatilities. The study therefore recommended borrowing to finance only capital projects and not recurrent expenditures, and the execution of these projects should be paid in domestic currencies to increase demand for naira.

Risk of Geometric Increase in Debt Servicing on Public Investments in Nigeria

The study investigated the risk of geometric increase in debt service on public investments in Nigeria using a time series data from 1985 – 2021. The study employs ARDL model in analyzing the behavior of the variables. The findings show that there is a significant direct relationship between domestic debt stock and public investment. Similarly, it also shows same non-risky relationship between external debt and public investment in the past two years as shown from lagged values of last year and the year preceding it. External debt servicing has non-risky relationship with public investment in the current year as it avoid crowding out effect of private investment. But it shows a risk relationship in the two years before. The results also visualize that there is a direct relationship between FDI and public investment in the current year and indirect relationship in the preceding years. It can also be seen that a negative relationship exists between inflation and public investment, while a negative relationship exists between exchange rate and public investment in the current year, a positive relationship exists between exchange rate and public investment for Nigerian economy which suggests that exchange rate volatility matters as it affects debt servicing in the long run.

Public Debt and Economic Growth: Empirical Evidence from Nigeria

This study examined the impact of public debt on economic growth in Nigeria using annual secondary data from 1981 to 2021 and the Auto-Regressive Distributed Lag technique. The variables used in the study were real gross domestic product (RGDP), which is the proxy for economic growth, gross fixed capital formation (GFCF), external debt (EXDT), exchange rate (EXCR), domestic debt (DODT) and debt service repayment (DSRT). The results of the findings show that the past value of RGDP, GFCF, EXDT and DSRT have positive impact on economic growth in Nigeria. Also, EXCR and DODT have negative impact on economic growth in Nigeria. Judging from the p values, the lagged value of RGDP, GFCF, EXDT and DSRT are statistically significant as their p values are lower than critical values at 5 percent level of significance, while EXCR and DODT have no significant impact on economic growth in Nigeria. Based on the findings, the study recommends that government should formulate and effectively implement policy that would boost domestic revenue generation by broadening the revenue base, improving capacity to tax and curtailing ineffective government spending. Also, borrowed funds should be utilized for the diversification of the productive base of the economy.

PUBLIC DEBT AND ITS EFFECT ON THE NIGERIAN ECONOMY

The study examined the impact of public debt and its effect on the Nigerian economy for the period of 1985-2020 (36years). This was done respect of measures of public debt, namely; Domestic Debt Stock (DDS), External Debt Stock (EXTDS), External Debt Servicing (EXTDSG) and Total Public Debt (TPD) and how they affect Nigerian economy {proxy with Real Gross Domestic Product (RGDP)}. The method of data collection used in this study is the secondary source of data (time series data), from the CBN Annual Report and Debt Management Office Annual Reports. The data set was described using descriptive statistics and the unit root test was conducted to ascertain if the data are stationary in order to have accurate regression result. The correlation analysis will be use to ascertain the co-movement of the independent variables in relation to the dependent variable while the Multiple Regression analysis were employed with the aid of E-VIEW version 9.0 for the purpose of testing the research hypotheses raised. The finding revealed that EXTDSG have positive and significant effect on RGDP while DDS, EXTDS and TPD has negative and insignificant effect on RGDP proxied for Nigerian economy. Hence, the study concluded that public debt does not exerts significant effect on the Nigerian economy. This study recommends that since foreign debt impacted negatively on Nigerian economy, government should discontinue borrowing to finance the national budget, in a bid to achieve key macro-economic goals such as price stability, improvement in standard of living, provision of social and economic amenities amongst others, which will bring about economic growth and development in Nigeria.
 Keywords: Domestic Debt Stock, External Debt Stock, Debt Servicing and Real Gross Domestic Product.

Impact of External Debt on Economic Growth in Nigeria: 1986-2019

The study examined the impact of external debts on economic growth in Nigeria between 1986 and 2019. The specific objectives of this study were to: examine the impact of external debt stock on economic growth in Nigeria; assess the impact of external debt servicing on economic growth in Nigeria and investigate the extent to which external debt interest has impacted on economic growth in Nigeria. It was discovered that debt is synonymous to underdevelopment, poverty, unemployment which has led to low living standard of the people and Nigeria’s huge debt stock has prevented it from embarking on higher domestic investment which would lead to higher growth and development which is a major problem to Nigeria. The findings shows that Nigeria’s economic growth has been adversely but significantly affected by rising external debt servicing and the study recommended that external debt should be effectively utilize for sustainable development and diversification of Nigeria’s economy will reduce the rate of external debt. The study adopted the ex-post facto research design being of secondary nature and was used to test the hypotheses. Descriptive Statistics, Unit Root Test, Co-integration, Auto-regressive Distributive Lag and Error Correction Mechanism estimates, were used to estimate and to test the impact of external debt on economic growth in Nigeria were demonstrated.

Public Debt and Economic Development: An Empirical Evidence from Nigeria

This study investigates the impact of public debt on economic development in Nigeria. The objective is to empirical study the relationship between public debt and economic development in Nigeria between 1980 and 2019. Data were collected from the Central Bank of Nigeria (CBN) Statistical bulletin, and the Augmented DiDickey-FullerADF), Autoregressive Distributed Lag (ARDL), and Granger Causality were used to test the hypotheses and analyse the data. The results indicate that foreign debt servicing does not have a significant impact on Nigerian real GDP. Foreign debt servicing has a negative but insignificant impact on real GDP. In addition, the result indicates that external debt does not significantly impact unemployment. External debt servicing has no significant effect on unemployment. Given the study's findings and the importance of natural resource utilisation in the Nigerian economy, the study recommends that the private sector support the government in developing technology to facilitate natural resource exploitation to generate additional revenue to finance the government budget and reduce borrowings.

Public Debt and Economic Development: An Empirical Evidence from Nigeria

This study investigates the impact of public debt on economic development in Nigeria. The objective is to empirical study the relationship between public debt and economic development in Nigeria between 1980 and 2019. Data were collected from the Central Bank of Nigeria (CBN) Statistical bulletin, and the Augmented DiDickey-FullerADF), Autoregressive Distributed Lag (ARDL), and Granger Causality were used to test the hypotheses and analyse the data. The results indicate that foreign debt servicing does not have a significant impact on Nigerian real GDP. Foreign debt servicing has a negative but insignificant impact on real GDP. In addition, the result indicates that external debt does not significantly impact unemployment. External debt servicing has no significant effect on unemployment. Given the study's findings and the importance of natural resource utilisation in the Nigerian economy, the study recommends that the private sector support the government in developing technology to facilitate natural resource exploitation to generate additional revenue to finance the government budget and reduce borrowings.

Successful territorial brand formation (on the example of Singapore)

Main directions of improving the strategy of Ukraine's external debt management based on the results of the assessment of the main indicators of external state debt in relation to the criteria of economic security and the impact of external debt on key macroeconomic indicators are substantiated in the article. According to the results of the regression analysis of the relationship between main macroeconomic indicators and indicators of external debt, it was concluded that the external debt has an ambiguous impact on the economy of Ukraine. The hypothesis about the negative consequences of increasing the external state debt for the economy of Ukraine has not been fully confirmed. Based on the analysis of the data for 2008-2020, the direct impact of changes in external debt on GDP in actual prices, as well as the direct impact of gross external debt on changes in GDP per capita was identified. This confirms a positive role of external borrowing in ensuring Ukraine's economic growth. At the same time, the inverse dependence of Ukraine's GDP on changes in external debt per capita and the ratio of total payments to service external debt to state budget revenues was revealed. The dependence of GDP per capita on the ratio of total external debt service payments to state budget revenues is also inverse. The results of the study suggest an ambiguous impact of external debt on the national economy, which necessitates effective management of the external debt. The Long-Term Strategy for Ukraine's External Debt Management until 2030 should become an important institutional tool for reducing threats to the country's economic security arising from the growing debt burden. The purpose of the proposed Strategy is to minimize the cost of servicing external debt in the long run and reduce the level of relevant risks.

External Sector Macroeconomic Indices and Real Economy of Nigeria: An Empirical Analysis (1981 – 2020)

In recent times, the external sector of Nigeria’s economy has been characterized by instability, while the performance of her Real Economic Growth (RGDP) has remained below average. This study, therefore, investigated the relationship between her (RGDP), and some external sector macroeconomic indices, namely: Foreign Exchange Rate (FXR), Total Export (EXP). Trade Openness (TOR), Total Import (IMP), External Debt (EXTD), External Debt Service Charges, (EXDINT) and Foreign Direct Investment (FDIR), CBN is the source of the study data, spanning for a period of 1981 to 2020. The study applied Co-integration technique, Error Correction Model (ECM) and Granger Causality tests for the econometric analysis. Evidence from empirical results confirmed that, in the long run, only FDIR contributed positively to (RGDP), while the rest, had significant adverse effect on RGDP. The Granger Causality test established that only FDIR had bilateral relationship with RGDP while RGDP preceded EXP, TOR and FXR, implying that RGDP determines those variables without a feedback. EXTD, EXDINT and IMP maintained independent causal relationship. The ECM coeficient (-1.14), is significant and correctly signed (negative). It measures the speed of the adjustment, at which equilibrium is restored to RGDP, after the short-run disequilibrium in the selected indices. The implication is that RGDP growth process in Nigeria, in the long run, adjusts slowly to the changes in the selected indices, indicating a Policy lag effect. Consequently, Monetary authority should maintain efficient debt monitoring and management; effective and sustainable exchange rate management; infrastructural and technological development to beep up exportation. They should lay emphasis on stable political environment and sustainable economic policies to encourage more FDI. The Policy makers should make policies that would match the magnitude of the expected changes.

FISCAL POLICY AND EMPLOYMENT GENERATION IN NIGERIA

<p>This paper investigated the influence of fiscal policy on employment generation in Nigeria. The analyzed data, spanning 1981 to 2020 were obtained from the statistical bulletin of Nigeria’s apex bank and the country’s Bureau of Statistics. The Error Correction Model was applied as the main analytical tool. The results showed that aggregate government expenditure has a positive but insignificant influence on the employment rate. In addition, total tax revenue and external debt service have negative and insignificant influences on the employment rate in Nigeria. What this suggests is that fiscal policy tools of aggregate government expenditure, total tax revenue and external debt service have not effectively helped to increase the level of employment in Nigeria. Generating from the findings, this paper suggested that government should maintain fiscal prudence and ensure that total tax revenue is efficiently and effectively utilized to provide infrastructural facilities and social amenities that will help the various sectors of the economy to function very well thereby generating enough employment in the country.</p><p><strong>JEL:</strong> O15; E24; J21; H60</p><p> </p><p><strong> Article visualizations:</strong></p><p><img src="/-counters-/edu_01/0954/a.php" alt="Hit counter" /></p>

The Impact of Debt Financing on Economic Growth

Aims: This paper focuses on the issue of the impact of debt financing on economic growth, especially the long-term economic growth in Morocco.
 Duration of Study: The public debt and economic growth evolution between 1984 and 2018.
 Methodology: In order to answer our research question, we adopt a positivist epistemology with a deductive methodological approach through an econometric modeling. An autoregressive model “VAR” was applied using the stationarity and co-integration’s tests and causality’s tests.
 Results: The findings revealed a significant positive relationship between public debt and economic growth in the period between 1984 and 2018. This is due to the good management strategy of the public debt and the good institutional governance. However, the level of the external public debt service has no significant impact on real growth rate.

Sustainability of External Debt on Economic Growth: Econometric Evidence from Nigeria

External debt sustainability includes external debt stock, external debt service and external debt to export ratio while gross domestic product is used as a proxy for economic growth. This study adopted the descriptive ex-post facto research design and the time series data on the variables were gotten from the CBN statistical bulletin (2020) and the Nigerian Bureau of Statistics (2018). The data were analyzed using the Granger Causality Test and the Ordinary Least Square regression analysis. The findings of the study revealed that external debt has positive and significant relationship with economic growth while external debt service and external debt to export ratio both has a negative relationship with economic growth. The results of the Granger Causality test revealed that unidirectional causality (effect) was found flowing from external debt to exports ratio and external debt to economic growth while there was no causality found between external debt service and economic growth in Nigeria. The study recommended that the monetary authorities should ensure that external debt incurred would ultimately result in economic growth by judiciously allocating these debts to sectors that boost output productivity and that external debt policies decisions should be founded on sustainability indicators such as external debt to export ratio, ensuring that debt is maintained below established thresholds.

Effect of External Debt Service on Economic Growth in Nigeria

External debt service is major debt variable in economic growth and public debt debate. However, this variable is often ignored in literature. This study investigated the relationship between external debt service and economic growth in Nigeria from 1981 to 2020. A quantitative research approach was adopted for this study. The method for estimation was the Auto-Regressive Distributed Lags (ARDL) model. The ARDL bound test results showed there was co-integration. The speed of change between the short-run and long-run of the co-integrating equations was 88.86%. The study used debt overhang theory, the neo-classical theory and endogenous theory as the theoretical framework. The study provided evidence of a negative relationship between external debt service and economic growth although this is not statistically significant. The result shows resource depletion effect of external debt services on growth. External debt stock has a positive but not significant relationship with growth. There is a positive but not significant relationship between external reserves to external debt ratio with growth. Debt service to export ratio has a positive relationship with growth. The study recommends that policy makers in Nigeria should develop a methodology to compare the return on external debt to be incurred with the cost of debt so that gains that may eventually offset the cost of debt service. This methodology should be a policy or legislation.

External Debt-Economic Growth Nexus: The Sierra Leonean Case (1973-2021)

The study investigates the nexus between external debt and economic growth in Sierra Leone for the period spanning between 1973 and 2021. In many developing countries, huge external indebtedness has been seen as a strong break on the road to economic growth and development. Indeed, the study focuses on both external and internal factors that are responsible for the external debt problem in Sierra Leone. Data employed in this study are secondary and were collected from various sources including the Central Bank of Sierra Leone and the Ministry of Finance. Key macroeconomic variables such as external debt to Gross Domestic Product (GDP) ratio, external debt service to export earnings ratio and terms of trade were specified in the model and tested for stationarity using unit root tests. The study also employed the ordinary least square (OLS) technique for the purpose of estimating the relevant parameters of the model. Various diagnostic tests are carried out to appraise the robustness of the estimated growth equation using appropriate econometric criteria. The study empirically reveals a negative nexus between external debt and economic growth in Sierra Leone for the period under study signifying that debt accumulation impacts adversely on the country’s long-run growth trajectory which confirms debt “overhang” problem in Sierra Leone. This is clearly evident in the coefficients of the variables representing debt as a ratio of GDP, debt service as a ratio of export earning and terms of trade. The study, therefore, proffers certain recommendations in line with the findings.

Hypotheses Testing: Capital Flight and Human Development Index in Nigeria

This study examined Capital Flight and human development index in Nigerian. Capital Flight was proxied by foreign direct investment abroad, external debt servicing, external reserves and capital and financial account deficits. Based on the study objectives, relevant literature were reviewed and evaluated. Relevant data were extracted from the annual Statistical Bulletin of the Central Bank of Nigeria and the National Bureau of Statistics. Unit root test was conducted using Augmented Dickey Fuller method which revealed that the variables were integrated at level and first difference: necessitating the use of autoregressive distributive lag/bonds test to explore the long run relationship existing among the variables in the model and the result showed that the variables in the model were co-integrated thus we proceeded in evaluating the long run as well as the co-integrating form in the model. From the result of the various tests, it was revealed that capital and financial account deficit, external debt servicing and external reserve were positively related to human development index while foreign direct investment outflows was negatively related to human development index. Also, capital and financial account deficit, external reserve and foreign direct investment outflow were significant while external debt servicing was not significant. Based on the findings from the analysis, the study recommended amongst others, that external debt acquired should be judiciously used for infrastructural development that would encourage investments which would ultimately bring about economic growth as well as enhance human development in Nigeria.