ABSTRACT

The study examines the impact of external debt on the economic development of Nigeria. In line with the broad objective of the study, two specific objectives were examined viz: To determine the impact of external debt on economic development in Nigeria and to examine if there is a causal relationship between external debt and economic development in Nigeria. To achieve these, the study estimated an error model as well as a pair wise granger causality test. Time series data of human development index (HDI), external debt, exchange rate, money supply, interest rate differential and gross domestic product obtained from CBN Statistical bulletin and world economic indicators were used for the purpose of the analysis. The result of the analysis suggests that external debt has an inverse relationship with economic development in Nigeria and that there is no causal relationship between external debt and economic development in Nigeria. The study recommends that governments should borrow money domestically rather than externally and that government should ensure that borrowed funds are efficiently utilized in carrying out projects that will benefit the people.