Pre2000 2006 this stage was dominated by concerns for the countrys unsustainable external debt and the quest for debt relief. Analysis of external debt and economic growth in nigeria. The nexus between external debt and economic growth in nigeria 1981 2009. D department of banking and finance faculty of management sciences ekiti state university ado ekiti, nigeria abstract. This has informed the need to embark on the present study with a view to investigating the impact of. Causality, domestic debt, gross domestic product, economic growth, nigeria. This paper is intended to examine the domestic debteconomic nexus in nigeria during such a fairly long time period as 1980 to 2015. 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. Impact of external debt shocks on economic growth in.
Determining the optimal public debt threshold for nigeria econstor. Reuters correspondent alexis akwagyiram explains why president muhammadu buhari wants to stop pegging the country. Journal of economics and sustainable development issn 22221700 paper issn 22222855 online vol. The paper questions the extent to which domestic debt empirically impactt on economic growth in nigeria between 1981 to 2012. However, macroeconomic factors such as real interest rate, inflation rate, and exchange rate did not have a significant effect on economic growth. The paper examined the causal nexus between public debt and economic growth in nigeria between 1970 and 2010 using a vector autoregressive var. Pdf effect of external debt on economic growth of nigeria. Nigeria is confronted with the issue of limited capital and has to resort to foreign debt in order to augment domestic savings, balance of payment deficits, and shortfall in revenue which induce continuous raise in the debt stock at an alarming rate. Abstract this work evolved out of the need to provide an indepth understanding of the economics of debt in nigeria. Oct, 2014 journal of economics and sustainable development issn 22221700 paper issn 22222855 online vol. In the longterm, the nigeria public external debt is projected to trend around.
Analysis of the impact of external debt on economic growth in. However, macroeconomic factors such as real interest rate, inflation rate, and exchange rate did not have a. The first most significant rise in nigerias public debt occurred in 1987 when the total debt rose by 96. To assess financial restructuring, capital market and economic growth in nigeria. A regression model, descriptive statistics and correlation analysis were used for analyzing the data. 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. Effects of public external debt and private investment on. In addition, error correction estimates revealed that external debt has negative relationship with economic growth in nigeria. D department of banking and finance faculty of management sciences ekiti state university ado ekiti, nigeria oke, michael ojo.
From then, the rise in nigerias public debt continued unabated such that as at 2004, total public debt stood at n6,188. When economic growth is enhanced at least more than 5% growth rate the economys poverty situation is likely to be affected positively3. According to wikipedia 2018 external debt is the total debt a country owes to foreign creditors. The effect of national debt on economic growth in kenya. The impact of domestic debt on economic growth of nigeria. Effect of external debt on economic growth and development of nigeria ajayi, lawrence boboye. The effect of foreign debt on the economic growth of nigeria.
Sep 11, 2012 external debt, economic growth and investment in nigeria 1. Effect of external debt on economic growth of nigeria. Effect of external debt on economic growth of nigeria 1. In the light of this, this study assesses the impact of public debt on external reserve in nigeria. The scope of the study covers the period from 1985 to 2015. Similarly, 19 examined the relationship between finance and economic growth in nigeria from 19752008 and employed the bound test autoregressive distributed lag ardl approach. As discussed in section 1, the results are inconclusive. External debt, internal debt and economic growth bound in nigeria. S 2008 the impact of external debt on economic growth. 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.
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. Thus, this paper focused on the impact of external debt on economic growth in nigeria from 1980 to 2017. Foreign debt management and the development of nigeria economy. Impact of external debt on economic growth in nigeria. The debtors can be the government, corporations or citizens of another country. The study postulates that external debt does not contribute to the economic growth of nigeria.
The result showed that the variables are stationary at first differencing. The used secondary data for a period of ten years 20052014, this data obtained from central bank of kenya. 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. Economic theory suggests that reasonable levels of borrowing by a developing country are likely to enhance its economic growth19.
Effects of public external debt and private investment on agricultural growth in nigeria. External debt, economic growth and investment in nigeria 1. The quest for economic growth and development compelled nigeria to acquire external debt. Effect of external debt on nigerian economy munich personal. This study aims at analysing the effectiveness of external debt on economic growth within a span of 19812010. Oct 26, 2017 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 impact of external debt on economic growth is a debatable issue between scholars since the onset of the debt crisis in 1980s. Causality, economic growth, external debt, internal debt, var, vec.
Evidence from nigeria hope ifeoma orjinta department of accountancy, faculty of management sciences, chukwuemeka odumegwu ojukwu university, igbariam campus, anambra state. Nigerias external debt had its origin in 1958 when a loan of usd28 million was obtained. The impact of public debt on nigerian economy research. External debt and economic growth evidence from nigeria by. The findings proved that, there was a long run and positive relationship between finance and economic growth. Debt relief is an agreement by a creditor of an indebted firm or country to accept reduced or postponed interest and. Analysis of the impact of external debt on economic growth. The growth of government bureaucracy permitted by the oil boom, as. Nigerias external debt and economic growth canadian center of.
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. Foreign debt management and the development of nigeria. The impact of public debt on economic development of nigeria. The study investigated the impact of external debt on economic growth in nigeria for the period 19802012. The variables used in the study were tested for stationarity using the augmented dickey fuller and philip perron test. 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. This study examined the impact of public debt on economic development of nigeria using annual time series data spanning 1986 to 2014. 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. Domestic debt, on the other hand, had no significant effect on economic growth.
D department of business administration, school of management sciences, salem university, lokoja, kogi state, nigeria. Effects of banks consolidation on economic growth in nigeria 20042015 hassan olanrewaju makinde ph. The empirical investigation of the effect of external debt on the economic growth of nigeria shall be restricted to 1970 to 2008 1. Impact of external debt shocks on economic growth in nigeria. Pdf this study investigates the relationship between nigerias external debt and.
The relationship between external debt and economic growth. Abstract external debt may help or hurt the country depending on how it is used. The scope of this study shall cover the public debt trend of nigeria over the years to date. This paper will examine specifically, the extent to which variations in nigeria debt structure contributed to the nations economic growth.
Nigeria prepares for drastic economic changes nigeria is africas largest economy. An empirical investigation was conducted using time. 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. External debt relief a nd economic growth in nigeria. Pdf the impact of domestic debt on economic growth of nigeria. Looking forward, we estimate external debt in nigeria to stand at 33000.
Nigeria, as a monoproduct economy, found itself in this position in the 1980s when her. This is plannedi9 to be achieved with the following specific objectives. External debt, economic growth and investment in nigeria. Nigeria public external debt 20082019 data 20202022.
An empirical analysis of the macroeconomic impact of. Statement of hypotheses based on the specific objectives of the study, the following null hypotheses will be tested. 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. The nexus between external debt and economic growth in. Data for the study are collected from secondary sources. Time series data on external debt stock and external debt service was used to capture external debt burden. D department of accountancy, faculty of management sciences. By 1970, nigerias external debt was less than usdlbillion.
An empirical analysis of the macroeconomic impact of public. Assessment of financial restructuring and capital market on. Abstract this study examined the effect of bank consolidation on economic growth in nigeria. Nigerias public debt stock as at march 31, 2018 2852 downloads download 128 kb total public debt as at 31st december, 2017 4989 downloads download 6 kb total public debt as at 30th september 2017 3798 downloads download 11 kb total public debt as at 30th june 2017 2641 downloads download 5 kb. The study employed the augmented dickeyfuller test. Jun 19, 2016 nigeria prepares for drastic economic changes nigeria is africas largest economy. Gross domestic product, external debt services, external debt stock, external reserve, and exchange rate. External debt has no significant effect on economic development.
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. This paper is intended to examine the domestic debt economic nexus in nigeria during such a fairly long time period as 1980 to 2015. To investigate the direction of relationship that exist between financial restructuring. This study set out to analyse the impact of external debt on economic growth of nigeria. The study set out to test for both a long run and causal relationship between external debt and economic growth in nigeria. Sulaiman and azeez 2012 empirically examined the effect of external debt on the economic growth in nigeria and found that external debt is beneficial to the economy, thus, a unit increase in. Section 2 discusses the structure of the bond market in nigeria while evolution of. Following the introduction, the rest of the paper structured as follows. Corresponding author banking and finance department, faculty of management sciences, ekiti state university, ado ekiti. External debt, public investment, and growth in lowincome. Introduction theoretical and empirical studies on the importance of financial development and economic growth relationship had occupied a central position in the macroeconomics literature for developing economies like nigeria.
This volume of understanding monetary policy series provides an insight into the bonds market and its operation in nigerian. Anchored on the hypothetical launch pad that domestic debt has not significantly. To achieve this goal, the study used a descriptive research design. By 1970, nigeria s external debt was less than usdlbillion. It will cover some selected commercial banks in nigeria, which have engaged in one form of corporate restructuring exercise or the other and. The impact of external debt on economic growth in nigeria. Assessment of financial restructuring and capital market.
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. 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. 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. Additionally, capital stock had a positive relationship with economic growth. Effects of banks consolidation on economic growth in. Secondary data on real gross domestic product, external debt, external debt service and exchange rate were sourced from cbn statistical bulletin. That the external public debts stocks have no positive impact on the economic growth of nigeria.
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