Nigeria in her desperate quest for money to finance economic growth accepted foreign loans under stringent conditions. Shehu and aliyu 20 investigated the contribution of external debt to the economic growth of nigeria for the period 1970 2010 using ordinary least square ols method. The study set out to test for both a long run and causal relationship between external debt and economic growth in nigeria. The variables used in the study were tested for stationarity using the augmented dickey fuller and philip perron test. The study investigated the impact of external debt on economic growth in nigeria for the period 19802012. Abstract the necessity for governments to borrow in order to finance a deficit budget has led to the development of external debt. Research hypotheses the study will be guided by the following null hypotheses. Time series data on external debt stock and external debt service was used to capture external debt burden. This has informed the need to embark on the present study with a view to investigating the impact of.
The case of nigeria, african institute for economic develop ment and planning idep, dakar. The necessity for governments to borrow in order to finance a deficit budget has led to the development of external debt. Purpose this paper aims to investigate the impact of huge external debt with its servicing requirements on economic growth of the nigerian economy so as to make meaningful inference on the. External debt relief a nd economic growth in nigeria. A series of world oil price increases from 1973 produced rapid economic growth in transportation, construction, manufacturing, and government services. The study set out to test for both a long run and causal relationship between. Budget deficits, external debt and economic growth in nigeria osinubi, tokunbo s. Pdf effect of external debt on economic growth of nigeria. Because this led to a great influx of rural people into the larger urban centres. For individual households and firms, overborrowing leads to bankruptcy and financial ruin. Based on the literatures revealed above, most of the studies focused on the relationship between public borrowing and economic growth while studies are yet to emerge from the direction of causality between public borrowi ng and economic growth in nigeria. Cecchetti, mohanty and zampolli the real effects of debt 4 1. The models in this study was used to evaluate the developmental relationship between the independent variables and the dependent variables. Loan or borrowing to fund gaps in government revenue has become norm in subsahara africa especially in nigeria.
Budget deficits, external debt and economic growth in nigeria. A number of researchers have examined the effect of external debt on economic growth since the beginning of the new millennium. This study examines how the use of budget deficits as an instrument of stabilization leads to the accumulation of external debt with the attending effects on growth in nigeria between 1970 and 2003. In another single country study, adegbite 2008 investigate the impact that nigerias et al. The study used both descriptive and econometric tools.
Pdf the impact of nigerias external debt on economic. The quest for economic growth and development compelled nigeria to acquire external debt. Impact of external debt on nigeria economy unibrary. Although the absolute size of the debt, particularly the commercial. This page provides nigeria external debt actual values, historical data, forecast, chart, statistics, economic. Effect of external debt on economic growth and development. Scope the study is designed to cover the period of 1992 2004 and concentrates only on the external debt in nigeria and also economic growth. The nexus between external debt and economic growth in nigeria 1981 2009. Ppg external debt ratios remain elevated, in part reflecting weaker economic growth in 2016 due to a bad agricultural season and the effects of the political turmoil on tourism during high season.
External debt, economic growth, panel data analysis, wamz. Determining the optimal public debt threshold for nigeria1. Atoyebi kehinde olusegun, olohunlana dapo somod, sulaiman adebayo adeodu, okafor blessing okechi. The imp act of external debt on economic growth and public investment. This paper discusses the subsaharan africa debt problem. Theoretical perspective of external debt relief and economic growth the position of economic theory on the relationship between external debt relief and economic growth is vital to this study. Economic growth, external debt and budget deficit in jordan. External debt and growth dynamics in nigeria adamu 2016. The analyses of the data collected with descriptive statistics shows that, availability of access to external finance strongly. The author finds out that there is no causal relationship between external debt and economic growth. This thesis examines whether external debt affects the economic growth of selected heavily indebted poor african countries through the debt overhang and debt crowding out effect. Impact of nigerias external debt on its economic growth. Utomi, 2014 investigated the impact of external debt on economic growth in nigeria for the period 19802012.
The result showed that the variables are stationary at first differencing. The debt problem facing nigeria is concerned on how to stop incurring more debts and device a way of servicing the existing debt without causing some distortions in the economy. The necessity for governments to borrow in order to finance deficit budgets has led to the development of external debt. International journal of business and social science vol. The autoregressive distributed lag ardl model was employed as a technique of estimation in the study and the results led a finding that the external debt contribute negatively to growth in nigeria based on data from 1981 through 2016. Objective of the study the objective of this study is to determine the impact of nigerias external debt on its economic growth. The nigerian economy is one of the largest in africa. Ajide1 this paper investigates the role of frazer economic freedom index on fdi growth relationship over the period spanning 1980 through 2010 using annual time series data. A number of other studies have looked at the impact of external debt on economic growth in developing economies. Impact of external debt on economic development in nigeria. Sulaiman and azeez 2012 empirically examined the effect of external debt on the economic growth in nigeria and found that external debt is beneficial to the economy, thus, a unit increase in.
The burden of nigerias external debt is more than the country can bear and the state of economic growth in the country is hampered due to debt crisis. In a similar study, bamidele and joseph 20 examined the effect of financial crisis, external. Economic growth, external debt and budget deficit in. This research investigates the impact of external debt on economic growth in nigeria from 19802014 using the vector error correction model.
This study examines how the use of budget deficits as an instrument of stabilization leads to the accumulation of external debt with the attending. A multivariate regression approach was employed to estimate augmented growth models. External debt and domestic debt impact on the growth of the. This page provides nigeria gdp annual growth rate actual values, historical data, forecast, chart, statistics, economic. The choice of period was guided by data availability and the the escalation of. Effects of public external debt and private investment on agricultural growth in nigeria. But, when it is used imprudently and in excess, the result can be disaster. This study investigates the relationship between nigeria s external debt and economic growth, between 1975 and 2006.
Pdf the relationship between external debt and economic. Negative impact of external debt on nigeria economic growth. The relative economic impact associated with the servicing of the external debt is as critical for most african countries as it is for the major latin american debtors. A comparative study of nigeria and south africa article pdf available january 2008 with 9,663 reads how we measure reads. According to wikipedia 2018 external debt is the total debt a country owes to foreign creditors. The current study aims to investigate the impact of economic growth and external debt on budget deficit in jordan for the period 19932017, the study used unit root test, autoregressive distributive lag ardl approach, bound test, to examine the study hypotheses. Limitations in the course of carrying out this study, some problems were encountered which ranges from non availability. Rising public debt, and increasingly complex policy interventions by the central bank constrain private sector credit growth. Public debt and growth international monetary fund. Sulaiman and azeez 2012 used ecm to examine the effect of external debt on economic growth of nigeria. Ogunmuyiwa 2011 examined the tendency of external debt to promote economic growth in nigeria with granger causality test. Impact of external debt on economic growth in nigeria.
The nexus between external debt and economic growth in. The study postulates that external debt does not contribute to the economic growth of nigeria. Abstract this study examines the impact of external debt on the level of economic growth and the volume of investment in nigeria between 1980 and 2008. We adopt the debt cumgrowth model along with the investment model while the econometrics analysis. External debt is acquired in order to finance budget deficit and speed up economic activities, hence, external debt should result to economic growth of a nation.
The impact of nigerias external debt on economic development. Research question the study will provide answer to. The impact of external debt on economic growth is a debatable issue between scholars since the onset of the debt crisis in 1980s. Effect of external debt on economic growth of nigeria. The effects of external debt management on sustainable. The negative impact of external debt on nigeria economic growth hardly come to the mind of the policy makers at the point of contracting the loan. Since the late 1960s it has been based primarily on the petroleum industry. We begin by constructing an external debt sustainability index using principal component analysis to capture the overall effects of external debt indicators on economic growth. Ayadi and ayadi 2008 examined the impact of the huge external debt, with its servicing requirements on economic growth of the nigerian and south african economies. Jul 02, 2008 this paper aims to investigate the impact of huge external debt with its servicing requirements on economic growth of the nigerian economy so as to make meaningful inference on the impact of the debt relief which was granted to the country in 2006. This work evolved out of the zeal to provide an immense understanding of the nigeria economic of debt. The analysis of unit root was performed on each of the. The autoregressive distributed lag ardl model was employed as a technique of estimation in the study and the results led a finding that the external debt contribute negatively to growth in nigeria based on data from 1981 through 2016 which was in line with ayadi and ayadi2008.
External debt and growth dynamics in nigeria adamu. This study investigates the effect of the external debt burden on economic growth and development of nigeria. The paper examined the causal nexus between public debt and economic growth in nigeria between 1970 and 2010 using a vector autoregressive var. This has informed the need to embark on the present study with a view to investigating the impact of external debt on economic growth of nigeria. The empirical analysis is based on the ardl bound test. Used wisely and in moderation, it clearly improves welfare.
Information was generated extensively from literature, the nigeria central bank and national bureau of statistic reports. The debtors can be the government, corporations or citizens of another country. Global business, economics, finance and banking, october 1416. Faculty of social science, department of economics. Effects of public external debt and private investment on. This paper examined the relationship between external debt and economic growth in nigeria for the period of 19812014. Effect of external debt on economic growth and development of. They use a solowtype neoclassical growth model to regress the ratio of external debt to gross domestic. Akujuobi 20o7 concluded that external debts contributed negatively to nigerias economic growth as opposed to domestic debt which contributed positively to nigerias economic growth. Effect of external borrowing and foreign aid on economic.
This paper investigates the dynamic effects of external debt on economic growth in nigeria from 1970 through 20. The debt includes money owed to private commercial banks, other governments, or international financial institutions such as the international monetary fund imf and world bank. External debt is found to be a driver of economic growth if properly managed but its servicing rather than repayment is an inhibiting factor to economic growth. We adopt the debt cum growth model along with the investment model while the econometrics analysis. Nov 10, 2016 this paper therefore is set to investigate the impact of external debt, and domestic debt on economic growth in nigeria between 19702010 through the application of ordinary least square method to establish a simple relationship between the variables under study, augmented dickeyfuller technique in testing the unit root property of the series.
This paper aims to investigate the impact of huge external debt with its servicing requirements on economic growth of the nigerian economy so as to make meaningful inference on the impact of the debt relief which was granted to the country in 2006. Determinants of economic growth in nigeria kazeem b. Pdf external debt, economic growth and investment in. The broad objective of this study was to evaluate the impact of external debt on the development of the nigeria economy within the lifespan of 19852011. Nonlinear relationship between economic growth and domestic debt as % of gdp in nigeria, 2005 2015 figure 2c. Pdf the impact of external debt on economic growth. External balances are fragile to hot money movements, and fiscal buffers are exhausted, making nigerias economy vulnerable to external risks. Nonlinear relationship between economic growth and external debt as % of gdp in nigeria, 2005 2015.