Over emphasis on negative impact of debt will cause morbid fear of debt, resulting in debt avoidance when it would have stimulated the economy by bringing in the much needed capital for infrastructural development and investment. Effects of public external debt and private investment on agricultural growth in nigeria. Employing the ordinary least squares ols regression method the empirical results show that domestic debt has significant negative impact on economic growth in nigeria during the study period. Chowdhury 1994 attempted to resolve the controversy of cause and effect relationship between external debt and economic growth, by conducting granger causality tests for asian and pacific countries over a. D department of banking and finance faculty of management sciences ekiti state university ado ekiti, nigeria oke, michael ojo. Nigeria public external debt 20082019 data 20202022. Journal of economics and sustainable development issn 22221700 paper issn 22222855 online vol. The first most significant rise in nigerias public debt occurred in 1987 when the total debt rose by 96. Debt relief is an agreement by a creditor of an indebted firm or country to accept reduced or postponed interest and. The study postulates that external debt does not contribute to the economic growth of nigeria. Public debt, growth and poverty reduction in a failed. Pdf the impact of nigerias external debt on economic. Corresponding author banking and finance department, faculty of management sciences, ekiti state university, ado ekiti. Additionally, capital stock had a positive relationship with 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. External debt has no significant effect on economic development. In order to fully account for feedbacks, a vector autoregressive model is utilized. Analysis of external debt and economic growth in nigeria. Statement of the problem the issue of external debt in nigeria has become an immense status bestriding the main stream of international economy and politics. Nigeria with the much needed capital for investment which improved economic growth. The nexus between external debt and economic growth in nigeria 1981 2009. The underlying problems are on the servicing rather than on the repayment which is an impeding factor to economic growth. Domestic debt, on the other hand, had no significant effect on economic growth.
The impact of domestic debt on economic growth of nigeria. Nigeria has experienced high volatility in inflation rates. Statement of hypotheses based on the specific objectives of the study, the following null hypotheses will be tested. The variables used in the study were tested for stationarity using the augmented dickey fuller and philip perron test. This has informed the need to embark on the present study with a view to investigating the impact of. The model built for the study proxy gross domestic product as the endogenous variable measuring economic growth as a function of external debt, ratio of external debt to export, inflation, and exchange rate proxy as the exogenous variables. External debt, public investment, and growth in lowincome. The paper examined the causal nexus between public debt and economic growth in nigeria between 1970 and 2010 using a vector autoregressive var. 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. It draws on quantitative research methodological framework and specifically employs the ordinary least square regression ols technique to investigate the relationship between gross domestic product, interest rate, domestic debt, budget deficit and domestic credit to. This paper empirically examined the impact of domestic debt on economic growth of nigeria for the period 19852014 using annual time series data on variables as gross domestic product, treasury.
Furthermore, the channels through which debt affects growth may differ, given differences in the structure of the economy and the public sector across these two country groups. External debt is argued to propels economic growth when enhanced properly. Gross domestic product, external debt services, external debt stock, external reserve, and exchange rate. Show full abstract economic growth and external debt as well as domestic debt and economic growth was found at p economy, while debt services were negatively impacted on economic.
Iyoha1 this study examines the nexus between foreign trade and economic growth in nigeria using quarterly timeseries data for 1981q1 through 2010q4. D department of banking and finance faculty of management sciences ekiti state university ado ekiti, nigeria abstract. Pre2000 2006 this stage was dominated by concerns for the countrys unsustainable external debt and the quest for debt relief. In the light of this, this study assesses the impact of public debt on external reserve in nigeria. The result showed that the variables are stationary at first differencing. 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. The study is aimed at finding efficient debt management strategies to prevent future debt crises. Data for the study are collected from secondary sources. Effect of external debt on economic growth of nigeria 1. Increase in savings leads to increase in capital formation and production activities that will lead to employment creation and reduce external borrowing of government. Chowdhury 1994 attempted to resolve the controversy of cause and effect relationship between external debt and economic growth, by conducting granger causality tests for asian and pacific countries over a period of 19701988. The nexus between external debt and economic growth in.
Pdf external debt crisis, debt relief and economic. Effects of public external debt and private investment on. Macroeconomic determinants of economic growth in nigeria. The relationship between external debt and economic growth. Impact of external debt on economic growth in nigeria. D department of accountancy, faculty of management sciences. A number of researchers have examined the effect of external debt on economic growth since the beginning of the new millennium. The study make use of ordinary least square regression technique to draw out inferences on the relationship between external debt and economic growth. Ali 2012, external debt plays both a positive and negative role in shaping economic growth, particularly of the developing countries. The scope of the study covers the period from 1985 to 2015. External debt and economic growth evidence from nigeria by. The paper questions the extent to which domestic debt empirically impactt on economic growth in nigeria between 1981 to 2012. As discussed in section 1, the results are inconclusive.
Pdf effect of external debt on economic growth of nigeria. Abstract external debt may help or hurt the country depending on how it is used. However, macroeconomic factors such as real interest rate, inflation rate, and exchange rate did not have a. The paper examines the nigerian external debt crisis and efforts made to obtain debt relief in 2005. Time series data on external debt stock and external debt service was used to capture external debt burden. The debt crisis if not well managed will lead to liquidity crisis and foreign exchange crisis, which will retard the rate of economic growth and development in nigeria. Analysis of the impact of external debt on economic growth.
This paper attempts to contribute to existing literature by investigating the impact of bank credit on economic growth in nigeria via the reduced vector autoregressive var. A comparative study of nigeria and south africa article pdf available january 2008 with 9,750 reads how we measure reads. Effect of external debt on economic growth and development of nigeria ajayi, lawrence boboye. Effect of external debt on economic growth of nigeria. Impact of external debt shocks on economic growth in.
From then, the rise in nigerias public debt continued unabated such that as at 2004, total public debt stood at n6,188. Abstract this work evolved out of the need to provide an indepth understanding of the economics of debt in nigeria. A priori expectation was that external debt would bring about economic growth. The broad objective of this work is specified to evaluate the impact of external debt stock and. Secondary data on real gross domestic product, external debt, external debt service and exchange rate were sourced from cbn statistical bulletin. This study set out to analyse the impact of external debt on economic growth of nigeria. In the 1960s, nigeria was on a par, in terms of aspirations to attain a very high level of economic growth and development, with its fellowoil producing and exporting countries such as malaysia and indonesia, but has since failed to keep pace with them. According to wikipedia 2018 external debt is the total debt a country owes to foreign creditors. Evidence from granger causality tajudeen egbetunde department of economics and financial studies, fountain university, osogbo, nigeria abstract the paper examined the causal nexus betw een public debt and economic growth in nigeria between 1970 and 2010 using a vector autoregressive var. An empirical analysis of the macroeconomic impact of. An empirical investigation was conducted using time. This paper examines the causal relationship between globalization and economic growth in nigeria from 1981 to 2012. By 1970, nigerias external debt was less than usdlbillion. This study aims at analysing the effectiveness of external debt on economic growth within a span of 19812010.
This page provides nigeria external debt actual values, historical data, forecast, chart, statistics, economic. The impact of external debt on economic growth in nigeria. This poses a grave threat to the economy as a large chunk of the nations hard earned revenue is being eaten up. The study set out to test for both a long run and causal relationship between external debt and economic growth in nigeria. This study set out to analyze the impact of external debt on the economic growth of nigeria. The study investigated the impact of external debt on economic growth in nigeria for the period 19802012. The empirical investigation of the effect of external debt on the economic growth of nigeria shall be restricted to 1970 to 2008 1. External debt relief a nd economic growth in nigeria. Thus, this paper focused on the impact of external debt on economic growth in nigeria from 1980 to 2017. Time series data was used and sourced from the cbn statistical bulletin and annual reports. Evidence from nigeria hope ifeoma orjinta department of accountancy, faculty of management sciences, chukwuemeka odumegwu ojukwu university, igbariam campus, anambra state. Since the early 1970s, there has been more than three major episodes of high inflation in excess of 30 percent.
Foreign debt management and the development of nigeria. Pdf the impact of external debt on economic growth. According to abubakar 2011, nigeria has been utilizing the external debt to the extent that the debt becomes so huge to water down substantial part of the countrys revenue. External debt, economic growth and investment in nigeria. Rogofs 1990 proposition by finding the cause and effect relationship between external debt and economic slowdown in 7 asian countries for the period 1970 1988.
This paper uses a structural vector autoregression generalized economic growth model augmented with a debt variable to characterize the dynamic impact of innovations to external public debttogdp ratio on per capita gdp growth, investment, trade openness, exchange rate and inflation in nigeria over the period 19702014. Nigeria external debt the economic scenario has drastically deteriorated amid the twin shocks of the covid19 pandemic and global oil price crash. The debtors can be the government, corporations or citizens of another country. The quest for economic growth and development compelled nigeria to acquire external debt.