EFFECT OF EXTERNAL DEBTS ON ECONOMIC GROWTH IN NIGERIA: A STUDY OF PARIS AND LONDON CLUBS DEBT (1994 – 2023)

ABSTRACTS This study reviewed the effect of external debts on economic growth in Nigeria with specific emphasis on Nigeria over the period of 1994–2023. One major problem of this study is the underdevelopment of the Nigerian economy. An objective of the study is to measure the impact of external debt on the growth of the nation. The theoretical view sees external debt as a fiscal policy instrument which fills the savings gap. By extension, external debt supplements government external reserves and sustainable economic growth. From empirical results, borrowings should become an option only when high-priority projects are being considered, and borrowed funds should be strictly monitored and evaluated to ensure they are used for the purpose for which they are borrowed. The research design used in this study is the ex-post facto method. The Ordinary Least Squares (OLS) multiple regression analytical method was used to analyze the results, where GDP is the dependent variable, and Paris Club debt, London Club debt, and others are independent variables. Student’s t-test and Pearson correlation were used to test the hypotheses. The analysis of the data revealed that all forms of external debts contributed to the growth of GDP. The Pearson correlation showed that GDP had an inverse relationship with Paris Club debt, while it had a direct relationship with the rest of the independent variables. The hypothesis testing revealed that all independent variables have a positive impact and are also significant to the dependent variable, thereby rejecting the null hypotheses and accepting the alternative hypotheses. The study therefore recommends that there should be an improvement in the management of these external debt borrowings towards sustainable economic growth.