The Impact Of External Debt On Growth And Development Of The Nigerian Economy (1980-2001)

ABSTRACT

This study on the Impact of External Debt on Growth and Development of the Nigerian Economy from 1980-2001. The study is therefore necessitated by the need to find solution to the increasing external debt stock and service payments, which have become a constraining factor to economic growth. To find out how Nigeria has effectively managed her external debt and to identify the factors responsible for the inability of the Nigerian economy to expand irrespective of the increasing external public debt financing activities of various governments in Nigeria. The research relied on both primary and secondary data for the analysis and concentrated on the 1980-2001 period. For incisive analysis, the method of study adopted by this research was both fieldwork and library research. Through the fieldwork, data were collected from the Central Bank of Nigeria (the CBN). The hypotheses formulated were tested using multiple regression analysis. The findings show that with a negative debt stock beta coefficient of – 0.021, increase in debt stock lowers the growth rate of the Nigerian economy. This is so because the loans acquired were not judiciously used in projects that would otherwise make them selfliquidating and contributive to economic growth. Thus, Nigeria’s external debt has impacted negatively to the gross domestic product(GDP), which is a measure of economic growth leading to low economic performance through out the period under review. Factors militating against effective use of external loans in Nigeria include: diversion of proceeds of loans into other uses, declining foreign exchange earnings and the high import bills, financing of long-term projects with short / medium term debt, poor external debt management policies, investment of loan proceeds in projects that turned out to be towering white elephants, and rate of corruption government officials. Based on the findings, it is recommended that loans acquired should be channeled to projects that should make the loans self- liquidating and contributive to economic growth. Nigeria should review existing laws governing external borrowing. This will assist in controlling all new loans and improve the management of those debts. The research is therefore of significance by directing investment in viable projects which can pay for themselves and improve the country’s external debt position through improved export earnings rather than using other sources of revenue accrued to the country to service such debts.