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Foreign Debt Management and the Development of Nigeria Economy

  • Mayowa Gabriel AJAO

    ()

    (Faculty of Management Sciences, University of Benin, Nigeria)

  • Aigbedo Omorose OGIEMUDIA

    (Faculty of Management Sciences, University of Benin, Nigeria)

Registered author(s):

    This study reviews the effect of foreign debt management on sustainable economic development with specific emphasis on Nigeria over the period of 1979?2009. Data analysis shows that access to external finances strongly influence the economic development process of Nigeria and other nations. The ordinary least square multiple regression analytical method is use to examine the relationship between external debt management and economic development, while error correction model (ECM) is use to determine the long-run and short run dynamics among the relevant variables. The empirical result shows that there is a significant relationship between external debt and economic development in Nigeria, external debt stock contributes significantly to Nigeria GDP while debt servicing had a negative but insignificant impact on Nigeria GDP. The results also reveal that external debt stock and debt servicing had a mix delay effect on the Nigerian economy. Debt can only be productive if well managed in an environment with sound macroeconomic policies which is an important prerequisite for the development of an economy.

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    File URL: http://www.bapress.ca/ref/v3-1/2013110.pdf
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    Article provided by Better Advances Press, Canada in its journal Review of Economics & Finance.

    Volume (Year): 3 (2013)
    Issue (Month): (February)
    Pages: 99-109

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    Handle: RePEc:bap:journl:130110
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    1. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
    2. S. M. Ali Abbas & Jakob Christensen, 2007. "The Role of Domestic Debt Markets in Economic Growth; An Empirical Investigation for Low-Income Countries and Emerging Markets," IMF Working Papers 07/127, International Monetary Fund.
    3. Dickey, David A & Fuller, Wayne A, 1981. "Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root," Econometrica, Econometric Society, vol. 49(4), pages 1057-72, June.
    4. Cohen, Daniel, 1995. "Large external debt and (slow) domestic growth a theoretical analysis," Journal of Economic Dynamics and Control, Elsevier, vol. 19(5-7), pages 1141-1163.
    5. Schclarek, Alfredo, 2004. "Debt and Economic Growth in Developing and Industrial Countries," Working Papers 2005:34, Lund University, Department of Economics.
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