The case of nigeria, african institute for economic develop ment and planning idep, dakar. External debt and economic growth journal of economic integration. 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. Oct 16, 2019 rising public debt continues to be a cause for concern in nigeria. Ascertain the impact of external debt on gross domestic product gdp in nigeria. The burden of external debt is measured by the debtservice ratio. To reduce the adverse effects of external debt on the nigerian economy and make it sustainable the study recommends that an analysis of the. We adopt the debt cumgrowth model along with the investment model while the econometrics analysis. Using the ordinary least square, on the secondary data sourced from the cbn and dmo among other sources, findings reveals that all the. Total external debt stocks to gross national income. But, when it is used imprudently and in excess, the result can be disaster. Nigerias rising public debt continues to be a cause for. Impact of public external debt on exchange rate in nigeria.
Ogunlana1 introduction the management of nigerias external debt has been a major macroeconomic problem especially since the early 1980s. Nigeria in her desperate quest for money to finance economic growth accepted foreign loans under stringent conditions. Debt burden indicators and debt servicing capacities, nigeria. While nigerias debt vulnerability worsens under this scenario, it still remains below the 100% threshold level at this level, nigerias external debt would need to reach usd60. When a government borrows money from its own citizens by selling bonds or longterm credit instruments a internal debt is created. Nigerias external debt increased so much due to excess borrowing from international agencies and countries at nonconcessional interest rate as a result of the. Ricci 2002, 2004 find a nonlinear effect of external debt on growth. External debt and domestic debt impact on the growth of the. Effect of external borrowing and foreign aid on economic. In 1990, the cbn introduced a set of prudential guidelines for licensed banks which were complimentary to the capital adequacy requirement and statement of accounting standards. Used wisely and in moderation, it clearly improves welfare. Analysis of the impact of external debt on economic growth in an. External debt and domestic debt impact on the growth of.
Effect of external debt on nigerian economy munich personal. Analysis of the impact of external debt on economic growth in. On the determinants of external debt in nigeria papers in the ssrn. The study divides public debt into external debt and. The management of nigerias external debt has been a major macroeconomic problem especially since the early 1980s.
It refers to a countrys repayment obligations of principal and interest for a particular year on its external debt as a percentage of its exports of goods and services i. Section 12 subsections 1 to 5, cbn act of 2007 ammended. This study set out to analyse the impact of external debt on economic growth of nigeria. The main objective of the study is to determine whether external debt has significant relationship with economic growth in nigerian. The portion of a countrys debt that was borrowed from foreign lenders including commercial banks, governments or international financial institutions. In india, public debt refers to a part of the total borrowings by the union government which includes such items as market loans, special bearer bonds, treasury bills and special loans and securities issued by the reserve bank. Nigerias debt service to revenue ratio is at over 60%, which means for every n100 earned, it spends n60 in servicing debt. Domestic and external public debt in developing countries ugo panizza no.
Debt relief, external debt, economic growth, nigeria, imf, vec. Pdf this research work was aimed at ascertaining the impact of external debt on economic growth in nigeria. In the light of this, this study assesses the impact of public debt on external reserve in nigeria. Rising public debt continues to be a cause for concern in nigeria. Following this, we estimate external debt to exports will rise sharply to 71%, up from 27% in 2017. Nigeria government debt to gdp 19902018 data 20192020. Nigeria has been utilizing the external debt to the extent that the debt becomes so huge to water down substantial part of the countrys revenue. Nigerias external debt outstanding, end of year 37 17. The current study aims to investigate the impact of economic growth and external debt on budget deficit in jordan for the period 19932017, the study used unit root test, autoregressive distributive lag ardl approach, bound test, to examine the study hypotheses. Furthermore, upward movements in the interest rate affected the size of the external debt stock. Search, browse and map more than 10,000 projects from 1947 to the present. Section four deals on the presentation and discussion of the result and this was concluded in section five. Debt service payment, external reserve resource and interest rate has no significant effect on nigeria economic growth and development the rejection of the null hypothesis means the acceptance of the alternative hypothesis.
The empirical results indicate that oil price, debt service and gross domestic savings play a significant role in determining external debt in nigeria. The legal backing for monetary policy by the bank derives from the various statutes of the bank such as the cbn act of 1958 as amended in cbn decree no. The debt management office dmo nigeria is a government agency established to centrally coordinate the management of nigerias debt. The debt management office dmo nigeria is a government agency established to centrally coordinate the. This study examines how the use of budget deficits as an instrument of stabilization leads to the accumulation of external debt with the attending. Pdf the impact of nigerias external debt on economic.
Ali 2012, external debt plays both a positive and negative role in. On the determinants of external debt in nigeria by ibrahim. This situation led to the inability of nigeria to generate the needed fund. Pdf purpose this paper aims to investigate the impact of huge external debt with its servicing requirements on economic growth of the nigerian. External debt and domestic debt impact on the growth of the nigerian economy 1 aminu umaru, 2 ahmadu aminu hamidu and 3 salihu musa 1 department of economics, modibbo adama university of technology, yola, adamawa state, nigeria. Determine the effect of external debt servicing on gross domestic product in nigeria. Thus, heavily indebted countries in subsaharan africa need to evolve creative strategies for bringing about debt reduction so that the high debt stock and associated crushing debt service burden would not impact too negatively on economic growth.
Cecchetti, mohanty and zampolli the real effects of debt 4 1. Abstract this study examines the impact of external debt on the level of economic growth and the volume of investment in nigeria between 1980 and 2008. According to ahmed 1986, the size and burden of nigeria external debt was insignificant from 1971 to 1977. Mbah 2016 investigated the impact of external debt on economic growth of nigeria using the ardl bound testing approach to cointegration. Public debt and growth international monetary fund.
For many years now, the countrys debt has been growing in spite of the efforts being made by the government to manage and minimize its crushing effects on the nations economy. Impact of external debt on economic growth in nigeria. Secondary data were collected from central bank of nigeria statistical bulletin. We estimate that nigerias external debt to exports could rise by 7 percentage points to 34% in 2018. Since then, the government has paid creditors more.
Pdf the study investigates the effect of public borrowing on private investment in nigeria. Public debt, capital expenditure, recurrent expenditure, nigeria, displacement theory, creditors i. Nigerias revenue when compared to gdp is also incredibly weak. In april 2006, nigeria became the first african country to fully pay off its debt owed to the paris club. The imp act of external debt on economic growth and public investment. The impact of nigerias external debt on economic development article pdf available in international journal of emerging markets 33.
The scope of the study covers the period from 1985 to 2015. Particularly, nigerias domestic borrowing debt is aimed at escaping the dangers associated with external borrowings occasioned by rising government expenditures visavis falling government revenues, supplement the internal savings for productive. This page provides the latest reported value for nigeria government debt to gdp plus previous releases. Data for the study are collected from secondary sources. The necessity for governments to borrow in order to finance deficit budgets has led to the development of external debt.
To study the effects of public debt we have to first draw a distinction between internal debt and external debt. According to the debt management office dmo, the total external debt stands at. Analysis of the impact of external debt on economic growth. Africa, nigerias external debt stock follows an upward pattern over the years while the former is relatively stabilized ayad and ayadi, 2008. The impact of nigerias external debt on economic development. This is however well below the threshold of 100% prescribed by the imf, and the. The statistic shows the national debt of nigeria from 2014 to 2018, with projections up until 2024. Serving external debt may involve demand for foreign currency which tends to affect the exchange rate of the country. The study examines the impact of public external debt on the economic performance of nigeria from 1980 20. Nigeria public external debt 20082019 data 20202022. Nigerias external debt outstanding percentage distribution 38 18. Section three provides the source and methodology employed in the study. For many years now, the countrys debt has been growing in spite of the efforts being made by the government to manage and minimize.
Nigerias external debt profile nigerias external debt can be traced back to the pre. Pdf effect of external debt on economic growth of nigeria. Originalityvalue nigerias external debt is analyzed in a new context utilizing a different but innovative model and. Gross domestic product, external debt services, external debt stock, external reserve, and exchange rate. Nigeria recorded a government debt equivalent to 17. Introduction nigeria is a monoproduct economy and started experiencing public debt problem in the 1980s when her external debt position exacerbated. Keywords nigeria, economic development, debts, debt financing, investments. For individual households and firms, overborrowing leads to bankruptcy and financial ruin.
The link between public debt and government expenditure. Determinants and sustainability of external debt in a. Pdf external debt, economic growth and investment in. 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.