What is the effect of debt on Nigerian economic growth?

What is the effect of debt on Nigerian economic growth?

This study investigated the effect of government debt on Nigeria’s economic growth using annual data from 1980 to 2018 and the Autoregressive Distributed Lag technique. The empirical results showed that external debt constituted an impediment to long-term growth while its short-term effect was growth-enhancing.

Does external debt affect economic growth?

External debt significantly promoted growth in the long- run. The threshold test confirmed the presence of a threshold effect of external debt on economic growth, meaning that the Ivorian external debt and growth display a non-linear relationship.

Does external debt promote economic growth in Nigeria?

(2007) investigated the behaviour of donor agencies and they found that accumulation of external debt impairs economic growth in Nigeria. On the contrary, Ali and Mshelia (2007) found positive and negative relations between external debt and GDP for Nigeria.

What is Nigeria’s external debt?

External Debt in Nigeria averaged 17541.39 USD Million from 2000 until 2021, reaching an all time high of 37955.09 USD Million in the third quarter of 2021 and a record low of 3287.73 USD Million in the first quarter of 2007.

What is meant by external debt?

External debt is the portion of a country’s debt that is borrowed from foreign lenders, including commercial banks, governments, or international financial institutions. These loans, including interest, must usually be paid in the currency in which the loan was made.

Why does Nigeria embark on debt?

Loans were acquired by various tiers of government as Nigeria embarked on major development and reconstruction projects in the wake of the civil war. In 1982, when oil prices crashed, Nigeria was unable to pay off the loans it borrowed. Interest payments spiked, penalties rose, the crisis had begun.

How does debt affect economic growth?

Growing debt also has a direct effect on the economic opportunities available to every American. If high levels of debt crowd out private investments in capital goods, workers would have less to use in their jobs, which would translate to lower productivity and, therefore, lower wages.

What are the effects of external debt?

High and unsustainable levels of external debt can be especially risky for developing countries, exposing them to exchange rate fluctuations, sudden-stops in capital flows and sharp capital outflows, which may precipitate into a banking or currency crisis (Hemming et al., 2003).

What are the causes of increase in public debt in Nigeria?

The major factors include the rapid growth of public expenditure, particularly that on capital projects, borrowing from the international community at non-concessional interest rates, decline in oil earnings from the late 1970s and the dependence on imports, which contributed to the emergence of trade arrears.

What are the effect of external debt?

What causes external debt?

What are sources of external debt?

Description: External debt can be obtained from foreign commercial banks, international financial institutions like IMF, World Bank, ADB etc and from the government of foreign nations.

How does external debt affect the growth of a country?

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. Countries can have heavy external debt along with relatively higher level of exports that may help to sustain their level of external debt.

Is Nigeria’s budget deficit causing external debt crisis?

Despite gaps, it was concluded that excessive rate of government borrowing requirements arising from persistent and growing budget deficit has largely caused Nigeria external debt crises sustainability of debt servicing, borrowing countries need to adopt efficient external debt management strategies.

Why does Nigeria borrow money from external countries?

The main reason for external borrowing is to stimulate growth, the current external debt as a ratio of GDP seems to agree with this. Also the exchange rate shows a positive relation with Gross Domestic Product (GDP), this confirms that volatility of Nigerian exchange rate still increase GDP.

Does volatility of Nigerian exchange rate increase GDP?

Also the exchange rate shows a positive relation with Gross Domestic Product (GDP), this confirms that volatility of Nigerian exchange rate still increase GDP. The Private Investment which is measure of real and tangible development showed a negative relationship.