The literature presents both positive and negative. Empirical evidence from pakistan, international research journal of finance and economics, issn 14502887, issue 44, 8897. This heavily dependence on external resources became uncontrollable in late 1980s. Impact of rising external debt on economic growth the. 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. Analysis of the impact of external debt on economic growth in. The quest for economic growth and development compelled nigeria to acquire external debt. Saharan african country also relies on external debt to finance its saving investment gap, budget deficit and balance of payment deficit. Gross domestic product, external debt services, external debt stock, external reserve, and exchange rate.
With the oil glut and reduced revenue, it is expected that our external debt liabilities will increase and our economy will be unstable. Thus, this paper focused on the impact of external debt on economic growth in nigeria from 1980 to 2017. Article history abstract received 25 december, 2015. Finally, external debt service has been found to granger cause external debt, but there was no feedback. The debt management office dmo nigeria is a government agency established to centrally coordinate the management of nigerias debt. Global business, economics, finance and banking, october 1416. 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. The study is aimed at finding efficient debt management strategies to prevent future debt crises. This page provides the latest reported value for nigeria government debt to gdp plus previous releases. Nigeria public external debt 20082019 data 20202022. Afxentiou and serletis 1996 found that no causality exists between debt and income. Effect of external debt on economic growth economics essay. Impact of external debt on nigeria economy project. In a similar study, bamidele and joseph 20 examined the effect of financial crisis, external.
This study uses a sample of 39 ssa countries for 24 years 199020 to examine the effect of external debt on economic growth in ssa. 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 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. Therefore, as policy suggestions, projects to be financed by external debt should be wellappraised and must. The study set out to test for both a long run and causal relationship between external debt and economic growth in nigeria. Karagol 2002 however, found a unidirectional causality from debt to economic growth. Oct, 2014 debt service payment shows a tstatistics of 3. Impact of external debt on economic growth in nigeria. Analysis of external debt and economic growth in nigeria. External reserves management and its effect on economic growth of nigeria akinwunmi, adeboye akanni1 and adekoya, rosemary bukola2 1department of banking and finance, achiever. Additionally, capital stock had a positive relationship with economic growth. Show full abstract economic growth and external debt as well as domestic debt and economic growth was found at p in the economy, while debt services were negatively impacted on economic.
External debt has no significant effect on economic development. Nigeria government debt to gdp 19902018 data 20192020. Available indicators point to more upbeat activity in q2, on the heels of relativelysubdued growth in q1. Effect of external debt on economic growth of nigeria. 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. These similar works are available on the archives of schools andor beyond. The nexus between external debt and economic growth in.
Sep 11, 2012 external debt, economic growth and investment in nigeria 1. The study analyzed the data using ordinary least square and tested stationarity of. This study set out to analyse the impact of external debt on economic growth of nigeria. Nigeria recorded a government debt equivalent to 17. External debt, economic growth, panel data analysis, wamz. The models in this study was used to evaluate the developmental relationship between the independent variables and the dependent variables. Time series data on external debt stock and external debt service was used to capture external debt burden. The impact of external debt on economic growth is a debatable issue between scholars since the onset of the debt crisis in 1980s. 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. Data is classified by the 20 external debt statistics 20 eds and are defined by the sixth edition of balance of payments and international investment position manual. As discussed in section 1, the results are inconclusive.
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. Some studies on subsaharan africa concluded that external debt is deleterious to growth, but these studies are very scanty. Nigeria external debt the economic scenario has drastically deteriorated amid the twin shocks of the covid19 pandemic and global oil price crash. Huge external debt does not necessarily imply a slow economic growth.
Augmented dickeyfuller test has been used to diagnose whether time series data are nonstationary. The effect of huge external debt of less developed countries is believed to impede investment resources. Secondary data on real gross domestic product, external debt, external debt service and exchange rate were sourced from cbn statistical bulletin. External debt relief a nd economic growth in nigeria. The lockdown measures imposed in the countryas major economic centers will only amplify the blow as the services sector reels from the severe pullback in consumption. Highlighting, ajayi and oke 2012 investigated the effect of external debt on economic growth and development of nigeria using ols regression analysis and observed that external debt burden had an adverse. Pdf the impact of nigerias external debt on economic. 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. External debt, public investment, and growth in lowincome. Impact of external debt shocks on economic growth in. Effect of external borrowing and foreign aid on economic. External debt relief and economic growth in nigeria. May 02, 2017 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.
Using a large panel data of 93 developing countries over the period 19691998, pattillo and others 2002 find that the average impact of external debt on per capita gdp growth is negative for net present value of debt levels above 160170 percent of exports and 3540 percent of gdp. We took a point of glance of external debt and economic performance of pakistan from 1947 to till now. International journal of business and social science vol. The study investigated the impact of external debt on economic growth in nigeria for the period 19802012. However, macroeconomic factors such as real interest rate, inflation rate, and exchange rate did not have a. Limitations in the course of carrying out this study, some problems were encountered which ranges from non availability of relevant recent data to the paucity of available ones. External debt and economic growth evidence from nigeria by. 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. This work evolved out of the zeal to provide an immense understanding of the nigeria economic of debt. Umoh introduction this article overviews the growth and development of the nigerian economy from inde pendence to present times. The quarterly external debt statistics qeds is split into data releases, the special data dissemination standard sdds and the general data dissemination system gdds. Faculty of social science, department of economics. Statement of hypotheses based on the specific objectives of the study, the following null hypotheses will be tested.
Apr 03, 2017 the general overview of the debt cancellation shall be taken with certain issues raised and discussed. Nigeria in her desperate quest for money to finance economic growth accepted foreign loans under stringent conditions. The nexus between external debt and economic growth in nigeria 1981 2009. Show full abstract economic growth and external debt as well as domestic debt and economic growth was found at p economic growth and investment in nigeria 1. This study examined the structural break relationship between external debt and economic growth from 1980 to 2009 with a view to examine the effect of external debt relief on economic growth in nigeria. Abstract external debt may help or hurt the country depending on how it is used. West african institute for financial and economic management. A priori expectation was that external debt would bring about economic growth.
Domestic debt, on the other hand, had no significant effect on economic growth. 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. The variables used in the study were tested for stationarity using the augmented dickey fuller and philip perron test. According to preliminary opec data, oil production picked up noticeably in q2, which, coupled with higher crude prices, on average, in the same period, suggests that the sector helped buoy overall gdp growth. Determinants of economic growth in nigeria kazeem b. Effects of public external debt and private investment on. However, the empirical investigation of the effect of external debt on the economic growth of nigeria shall be restricted to 1981 and 2010. An empirical analysis of the macroeconomic impact of public.
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. The relationship between external debt and economic growth. The story of pakistan with regard to external debtforeign debt is selfexplanatory. The paper examines the nigerian external debt crisis and efforts made to obtain debt relief in 2005. An empirical analysis of the relationship between government. Data for the study are collected from secondary sources. Incidentally, as external debt shrunk, domestic debt continued to grow unabated such that by 2011, total debt which. A number of researchers have examined the effect of external debt on economic growth since the beginning of the new millennium. In the short run, there is bidirectional causality between external debt and economic growth. Pdf effect of external debt on economic growth of nigeria. Rogofs 1990 proposition by finding the cause and effect.
Primary objective of this paper is to explore the relationship between external debt and economic growth in pakistan using time series econometric technique. 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. External reserves management and its effect on economic. External debt, economic growth and investment in nigeria. Pdf external debt crisis, debt relief and economic. Atoyebi kehinde olusegun, olohunlana dapo somod, sulaiman adebayo adeodu, okafor blessing okechi. The paper examined the causal nexus between public debt and economic growth in nigeria between 1970 and 2010 using a vector autoregressive var. In the growth model direct relationship between public debt and economic growth has been examined. The paper questions the extent to which domestic debt empirically impactt on economic growth in nigeria between 1981 to 2012. The main objective of this paper is to examine the effect of external debt on economic growth in tanzania during the period of 199020, using time series econometric technique where by data were collected. An overview of the nigerian economic growth and development. 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. The study examines the effect of external debt on the economic growth of nigeria.
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