EXTERNAL DEBTS AND ECONOMIC GROWTH IN NIGERIA

Abstract

The rising debt and its attendant effect on the economy, has raised major issues in recent national discourse. The aim of this study was to examine the short-run and long-run effect of external debt and debt servicing on the growth of the Nigerian economy. The study employed data from 1981 to 2023 using Vector Error Correction Model and Autoregressive Distributed Lagto estimate the short-run and long run equilibrium. The findings from the study revealed that there is short-run and long-run relationship between external debt and economic growth in Nigeria. That external debt has positive short-run and long-run effect on the economy. It also found that debt servicing has negative short-run and long-run effect on the Nigerian economy. The study concluded that there is both short-run and long-run relationship between external debt and economic growth and also between debt servicing and economic growth. The study made the following recommendations: that there should be caution on the part of government in increasing the nation’s debt profile that are not investment grade debt. Borrowing that are made with the expectation of repayment from public revenue should be avoided.