The Effect of Foreign Debt on the Economic Growth of Nigeria

Cordelia Onyinyechi OMODERO, Ogechi Eberechi ALPHEAUS

Abstract


This study examines the effect of foreign debt on the economic growth of Nigeria. Data for the study are collected from the World Bank and Central Bank of Nigeria Statistical Bulletin. The variables on which data are sourced include nominal gross domestic product, foreign debt stock, foreign debt servicing, inflation rate, and exchange rate. Nominal gross domestic product is the dependent variable while foreign debt stock and foreign debt servicing are the major explanatory variables. Inflation and exchange rates are used as the control variables. The scope of the study covers the period from 1997 to 2017 and data are analyzed using the ordinary least squares regression technique. The regression results indicate that foreign debt exerts a significant negative influence on economic growth while foreign debt servicing has a strong and significant positive impact on economic growth. The other factors are insignificant in explaining economic growth under this scenario. Thus, the study recommends a more purposeful borrowing pattern and revenue generation through profitable capital investments as the remedy for a foreign debt crisis in the country. The study also suggests a revival of abandoned industries as a more effective way of reducing foreign borrowing, creating employment opportunities and alleviating poverty in the country.


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