Eternal Debt and Economic Growth in Nigeria: An ARDL Approach

Adegboyega Raymond Rahaj ()
Additional contact information
Adegboyega Raymond Rahaj: Olabisi Onabanjo University

Acta Universitatis Danubius. OEconomica, 2018, issue 14(4), 581-596

Abstract: The paper examines the impact of external debt on economic growth in Nigeria by taking a critical look into its origin and the process of its metamorphosis to the state of unsustainability before after the debt relief in June 2005. The secondary data collected from Central Bank of Nigeria and World Bank database between 1981 and 2016 were subjected to an ARDL method of analysis to determine both the short and long-run periods. The results show that ratio of external debt to gross national income, ratio of reserves to total debt and foreign exchange rate have a minimal long run positive effect on growth. Also, in the short run, all variables have positive effect on growth except foreign exchange rate which has negative impact. The Error Correction Model shows that there is 106 percent increase over the previous year growth. In conclusion, it is evident that for debt to be productive it requires effective management which will make the rate of return higher than the cost of debt servicing. In spite of this, the study recommends among others, that to achieve a long-term solution to the external debt problem, the spending must be of high priority and use on productive self-liquidating investment.

Keywords: Debt crowding effect; Debt-overhang effect; External debt servicing; Foreign exchange; External reserves (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://journals.univ-danubius.ro/index.php/oeconomica/article/view/4755/4528 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:dug:actaec:y:2018:i:4:p:581-596

Access Statistics for this article

More articles in Acta Universitatis Danubius. OEconomica from Danubius University of Galati Contact information at EDIRC.
Bibliographic data for series maintained by Daniela Robu ().