The Sustainability of External Debt and Economic Development in Nigeria.

Abstract:

This study carried out an empirical investigation on an empirical analysis of external debt sustainability and economic growth in Nigeria covering the period 1981 to 2021. Data for the study were extracted from the Central Bank of Nigeria (CBN) statistical bulletin and world development index (WDI) 2020. The method of data analysis used is the linear regression method with the application of Error Correction Model (ECM). The major findings of the study reveal that there exists a negative and insignificant relationship between external debt sustainability and economic growth in Nigeria (= -0.000206, p-value = 0.4955 > 0.05) and there is a bi-directional causality relationship between external debt sustainability and economic growth in Nigeria (p-value = 0.0005 < 0.05 and 0.0071 < 0.05). It is therefore the recommendation of the study that the government should ensure economic and political stability in order to enjoy the benefits of external debt and make the debt burden minimal and the government should acquire external debt largely for economic reasons rather than social or political reasons. This would increase the productivity of the nation.