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Does external debt impair economic growth in Nigeria?

Author

Listed:
  • Ekor, Maxwell
  • Orekoya, Tayo
  • Musa, Philip
  • Damisah, Osikwemhe

Abstract

The debt and economic growth debate remain topical in Nigeria given the controversies that often trail the government’s plan to always borrow to fund the annual budget deficits. This study provides an empirical contribution to the national discourse by assessing the impact of foreign debt on the Nigerian economy. Applying a dynamic variant of the auto-regressive distributed lag model, the main result from this study is that in the long run, external debt accumulation and the associated service payments have negative effects on the economy. The policy implication is that government should always ensure that external debt accretion is sustainable and used for infrastructure development.

Suggested Citation

  • Ekor, Maxwell & Orekoya, Tayo & Musa, Philip & Damisah, Osikwemhe, 2021. "Does external debt impair economic growth in Nigeria?," MPRA Paper 107844, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:107844
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    References listed on IDEAS

    as
    1. Chris O. Udoka & Roland A. Anyingang, 2010. "Relationship between External Debt Management Policies and Economic Growth in Nigeria (1970-2006)," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 1(1), pages 2-13, December.
    2. Catherine Pattillo & Hélène Poirson & Luca Antonio Ricci, 2011. "External Debt and Growth," Review of Economics and Institutions, Università di Perugia, vol. 2(3).
    3. Samson Edo, 2002. "The External Debt Problem in Africa: A Comparative Study of Nigeria and Morocco," African Development Review, African Development Bank, vol. 14(2), pages 221-236.
    4. S.Ibi Ajayi, 1991. "Macroeconomic approach to external debt The case of Nigeria," Working Papers 8, African Economic Research Consortium, Research Department.
    5. Augustin Kwasi Fosu, 2007. "The External Debt-Servicing Constraint and Public Expenditure Composition: Evidence from African Economies," WIDER Working Paper Series RP2007-36, World Institute for Development Economic Research (UNU-WIDER).
    6. Ms. Hélène Poirson & Mr. Luca A Ricci & Ms. Catherine A Pattillo, 2004. "What Are the Channels Through Which External Debt Affects Growth?," IMF Working Papers 2004/015, International Monetary Fund.
    7. Osinubi, T.S. & Olaleru, O.E., 2006. "Budget Deficits, External Debt And Economic Growth In Nigeria," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 6(3).
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    Cited by:

    1. Charles O Manasseh & Felicia C Abada & Ebelechukwu L Okiche & Ogochukwu Okanya & Ifeoma C Nwakoby & Peter Offu & Anuli R Ogbuagu & Chiedozie O Okafor & Paul C Obidike & Nnenna G Nwonye, 2022. "External debt and economic growth in Sub-Saharan Africa: Does governance matter?," PLOS ONE, Public Library of Science, vol. 17(3), pages 1-28, March.

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    More about this item

    Keywords

    Economic Growth; External Debt; Auto-Regressive Distributed lag Model;
    All these keywords.

    JEL classification:

    • H61 - Public Economics - - National Budget, Deficit, and Debt - - - Budget; Budget Systems
    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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