THE IMPACT OF EXTERNAL DEBT ON THE ECONOMIC GROWTH OF NASARAWA STATE

This study examined the impact of external debt on the economic growth of the Nasarawa State economy, with specific focus on the Ministry of Finance, Lafia. The research established that external debt has been a major source of financing developmental projects in the state, particularly in the areas of infrastructure, education, health, and agriculture. However, it was found that the accumulation of excessive external debt without corresponding revenue-generating investments often hampers sustainable growth due to rising debt servicing obligations. The study revealed that while moderate external borrowing can support economic growth by bridging the resource gap and financing capital projects, poor debt management practices, misallocation of borrowed funds, and high interest obligations negatively affect the state’s fiscal stability. Findings also showed that the burden of debt servicing often reduces the resources available for capital expenditure, thereby limiting the government’s ability to invest in productive sectors of the economy. Furthermore, responses from staff of the Ministry of Finance, Lafia, confirmed that lack of effective debt monitoring mechanisms, corruption, and dependence on external borrowing rather than internally generated revenue (IGR) have aggravated the challenges of debt sustainability in Nasarawa State. Overall, the results indicate that while external debt can stimulate economic growth when well managed, its mismanagement leads to economic stagnation and fiscal stress.