IMPACT OF EXTERNAL DEBT ON ECONOMIC GROWTH IN NIGERIA (2020-2024)
Abstract
ABSTRACT
The study investigated the impact of external debt on economic growth in Nigeria for the period 2020-2024. Time series data on external debt stock and external debt service was used to capture external debt burden. The study set out to test for both a long run and causal relationship between external debt and economic growth in Nigeria. An empirical investigation was conducted using time series data on Real Gross Domestic Product, External Debt Stock, External Debt Payments and Exchange Rate from 2020-2024. The techniques of Estimation employed in the study include Augmented Dickey Fuller (ADF) test, Johansen Co-integration, Vector Error Correction Mechanism and Granger Causality Test. The results show an insignificant long run relationship and a bi-directional relationship between external debt and economic growth in Nigeria. The findings of this research shows that past economic growth did not contribute to the present economic growth in Nigeria. In the same vein, external debt caused a significant setback to economic growth in Nigeria during the periods under investigation. Meanwhile, debt stock and economic growth had a direct relationship in the country. Exchange rate contributed a negative impact on economic growth. Therefore, policymakers in Nigeria should explore other means of financing country`s deficit budget rather than external debt and also the nigerian government should promote exportation of domestic products as a high exchange rate will make our goods more attractive in the foreign market and will increase foreign exchange earnings.
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