External Debt and Economic Growth: Evidence from Nigeria

Abstract

The study examined the impact of external debt on economic growth in Nigeria for the
\nperiod 1981-2014 based on annual data sourced from the Central Bank of Nigeria (CBN) Statistical
\nBulletin (various issues) and abstract of National Bureau of Statistics (NBS). The researcher
\nexamined the existence of Co-integration among the underlying variables using Auto-regressive
\nDistributed Lag (ARDL) model after conducting preliminary statistical test to ascertain the normality
\nof the variables as well as stationary of the data set using descriptive and unit root tests. The result of
\nthe ARDL test shows that a significant relationship exists between external debt and economic growth
\nboth at the long and short run. The study also examined the causality among the variables using
\nGranger causality test and observed that no causality exist among the variables. The study therefore
\nrecommends that government should ensure that loans obtained are used to finance profitable projects
\nthat would generate reasonable amount of revenue to service the debts and also adequate record of
\ndebt payment obligations should be kept and debt should not be allowed to exceed a maximum limit
\nin order to prevent debt overhang.