Abstract:

This study empirically examined the effect of external debt on economic growth in Nigeria under the period of 37 years (1981-2017). The study specifically examined the influence of external debt, external debt service payment and exchange rate on economic growth proxy as real gross domestic product. The study employed least square econometric technique to ascertain the relationship between external debt variables and economic growth in Nigeria. The study found that external debt and external debt service payment have negative effect on economic growth while exchange rate has positive effect on economic growth in Nigeria. The coefficient of multiple determinations (R2) showed that approximately 77% of variations in economic growth are explained by the explanatory variables (EXTD, EXTDS and EXR) while the remaining 23% is accounted by factors not specified in the model. However, The Durbin Watson correlation test indicated that there is positive autocorrelation in the model which implied there is about 23% missing variables in the model. The conclusion that may be drawn from the study is that external debt has negative effect on economic growth in Nigeria. Hence, it is recommended that Debt Management Office should set mechanism in motion to ensure that loans were utilized for purposes for which they were acquired and channel towards productive uses and sourcing external debts should be considered as a means of long run development not just for solving short run problems.