IMPACT OF EXTERNAL DEBTS ON NIGERIA ECONOMY

ABSTRACT This study investigates the impact of external debt on the Nigerian economy between 1992 and 2021 using secondary data obtained from reputable sources such as the Debt Management Office, Central Bank of Nigeria, and World Bank. The research applies an ex post facto research design and employs time-series econometric tools, including the Augmented Dickey-Fuller (ADF) unit root test, Johansen co-integration test, and Error Correction Model (ECM) estimated through EViews 9.0. The study incorporates key macroeconomic variables such as Real Gross Domestic Product (RGDP), External Debt (EXDEBT), Debt Servicing (DEBTSERV), Exchange Rate (EXCHR), Inflation Rate (INF), Interest Rate (INT), Institutional Quality Index (IQI), and Global Economic Condition (GEC). The results reveal that external debt and debt servicing exert a statistically significant negative effect on economic growth in the short run. However, the error correction term is negative and significant, indicating a valid long-run relationship among the variables. The diagnostic tests confirm the reliability of the model with no presence of multicollinearity, heteroscedasticity, or non-normality. The study concludes that while external debt can serve as a tool for economic growth if efficiently utilized, excessive reliance without strategic allocation may hamper development. It recommends that the Nigerian government implement better debt management strategies, improve institutional governance, and invest borrowed funds in productive sectors to enhance long-term growth.