THE EFFECT OF EXTERNAL DEBT ON ECONOMIC GROWTH IN NIGERIA
Abstract
ABSTRACT
This study investigates the effect of external debt on economic growth in Nigeria over the period 1992 to 2023. Motivated by the persistent rise in Nigeria’s external debt stock and the associated macroeconomic implications, the research aims to evaluate whether foreign borrowing has significantly contributed to or hindered economic performance. Employing an ex-post facto research design, the study utilizes secondary time series data obtained from the Central Bank of Nigeria (CBN), the National Bureau of Statistics (NBS), and the Debt Management Office (DMO). The analytical approach includes the Autoregressive Distributed Lag (ARDL) model to examine both the short- and long-run dynamics between external debt and GDP growth. The findings reveal a mixed relationship: while external debt can enhance growth when effectively utilized, poor debt management and high debt servicing obligations tend to undermine economic progress. The study concludes that prudent external debt management, transparency in loan utilization, and strategic investment in growth-inducing sectors are critical for Nigeria’s sustainable economic development. Policy recommendations are provided to ensure that external borrowings contribute positively to long-term growth objectives.
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