ABSTRACT

The main objective of the study is to analyze the effect of external debt on economic growth in Nigeria. The data used is a secondary data collected from central bank of Nigeria statistical bulletin The analysis scope covered a period of thirty five years spanning from 1981-2015. The econometric methodology adopted is the Ordinary Least square method (OLS), Augumented Dickey Fuller, Unit root test, Cointegration and Error correction model. The variables of the model include Gross domestic product (GDP) as the dependent variable and external debt stock, exchange rate, and external debt service payment. are independent variables. The result show that external debt service payment is statistically significant while external debt stock is statistically insignificance. This research recommends that the external debt of the country should be promptly dully serviced to avoid stock pilled debt which has no good effect on the disposable income of the economy. Nigeria government should promote exportation of domestic products as a high exchange rate will make our goods more attractive in the foreign market and will increase foreign earnings to help in debt servicing. Given that external debt stock had a positive impact on economic growth in Nigeria implies that an increase in it will lead to increase in the growth of the economy, this notwithstanding, the study recommend that the stock borrowed should be effectively managed. The federal government should lay down guidelines in terms of defining the purpose, duration, moratorium requirements and commitments, negotiation among others including conditions for external debt stock that would lead to exceeding health threshold.