Abstract
Abstract. The study examined the impact of external debt on economic growth in Nigeria using Extended Hausman Rodrick Valesco growth diagnostic framework and Three Gap Model. Annual time series data sourced from the Central Bank of Nigeria statistical bulletin between 1981-2018 was regressed using the Augmented Dickey Fuller test (ADF) to check the stationary properties of the series, and the Engel-Granger Co-integration test to estimate the long-run relationship of the variables. The results show that external debt had negative impact on the Nigerian economy.
Keywords. External debt, Economic growth, Economic development, Johansen Cointegration, Time series models, Nigeria.
JEL. F34, F43, F63, C01.References
Abdelmawla, A., & Mohammed, B. (2005). The impact of external debt on economic growth: An empirical assessment of the Sudan: 1978-2001. Eastern African Social Science Research Review, 21(2), 53-66. doi. 10.1353/eas.2005.0008
Abubakar, N.A., & Hassan, S. (2008). Empirical evaluation on external debt of Malaysia. International Business and Economies Research Journal, 7(2), 95-108. doi. 10.19030/iber.v7i2.3226
Abubakar, S. (2011). External debt and Nigerian economic development: An empirical investigation, The National Conference on Growth, Poverty and Human Development in Africa: An Agenda for Development in Post Crisis Era. Nassarawa State University, Keffi, Nassarawa State.
Adepoju, A.A., Salau, A.S., & Obayelu, A.E. (2007). The effect of external debt management on sustainable economic growth and development, lessons from Nigeria, MPRA Paper, No.2147. [Retrieved from].
Adesola, W.A. (2009). Debt servicing and economic growth in Nigeria: An empirical investigation, Global Journal of Social Sciences, 8(2), 1-11. doi. 10.4314/gjss.v8i2.51574
Amoateng, K., & Amoaku, A.B. (1996). Economic growth, export and external debt causality: The case of African countries. Applied Economics, 28, 21-27. doi. 10.1080/00036849600000003
Audu, I. (2004). The impact of external debt on economic growth and public investment: The case of Nigeria, African Institute for Economic Development and Planning (IDEP), Dakar. [Retrieved from].
Ayadi, F.S., & Ayadi, F.O. (2008). The impact of external debt on economic growth: A comparative study of Nigeria and South Africa, Journal of Sustainable Development in Africa, 10(3), 234-264.
Bauerfreund, O. (1989). External debt and economic growth: A computable general equilibrium case study of Turkey 1985-1986. Unpublished Ph.D. Thesis, Duke University, Dubai.
Boopen, S., Kesseven, P., & Ramesh, D. (2007). External debt and economic growth: A vector error correction approach. International Journal of Business Research, 51(4), 211-233.
Borensztein, E. (1990). Debt overhang, debt reduction and investment: The case of Philippines. IMF Working Paper, No. WP/90/7. [Retrieved from].
Chauvin, N.D., & Kraay, A. (2005). What Has 100 Billion Dollars Worth of Debt Relief Done for Low Income Countries?” Mimeo, World Bank.
Cholifihani, M. (2008). A co-integration analysis of public debt service and GDP in Indonesia. Journal of Management and Social Sciences, 4(2), 68-81.
Choong, C., Lau, E., Liew, V.K., & Puah, C. (2010). Does debts foster economic growth? The experience of Malaysia, African Journal of Business Management, 4(8), 1564-1575.
Chowdhury, K. (1994). A structural analysis of external debt and economic growth: Some evidence from selected countries in Asia and the pacific. Applied Economics, 26(12), 1121-1131. doi. 10.1080/00036849400000110
Clements, B., Bhattacharya, R., & Nguyen, T.Q. (2003). External debt, public investment, and growth in low-income countries, IMF Working Paper, No.WP/03/249. [Retrieved from].
Cobbe, J. (1990). Africa's economic crisis: The roles of debt, the state, and international economic institutions. The Journal of Modern African Studies, 28(2), 351-358. doi. 10.1017/S0022278X00054574
Cohen, D., & Vellutini, C. (2004). Beyond the HIPC Initiative. Toulouse, France: European Commission. [Retrieved from].
Cohen, D. (1993). Low investment and large LDC debt in the 1980s. American Economic Review, 83(3), 437-449.
Cunningham, R.T. (1993). The effects of debt burden on economic growth in heavily indebted nation, Journal of Economic Development, 18(1), 115-126.
Deshpande, A. (1997). The debt overhang and the disincentive to invest. Journal of Development Economics, 52(1), 169-187. doi. 10.1016/S0304-3878(96)00435-X
Dessy, S.E., & Vencatachellum, D. (2007). Debt relief and social services expenditure: The African experience 1989-2003. African Development Review, 19(1), 200-216. doi. 10.1111/j.1467-8268.2007.00154.x
Dijkstra, G. (2006). Comment on Tony Addison: Debt relief: The development and poverty impact. Swedish Economic Policy Review, 13, 231-239.
Dinneya, G. (2006). Democracy, external debt and growth in Nigeria: An impact analysis under a narrow definition of debt-led growth, Canadian Journal of Political Science, 39(4), 827-53. doi. 10.1017/S0008423906060379
EI-Shibly, A., & Thirlwall, A.P. (1979). The balance of payments constraint as an explanation of international growth rate differences, Banca Nazionale del Lavoro Quarterly Review, 32(128), 45–53.
Elbadawi, I., Ndudu, B., & Ndung’u, B. (1997). Debt overhang and economic growth in Sub-Saharan Africa. In Z. Iqbal, & K. Ravi (Eds.), External Finance for Low Income Countries. IMF Institute, Washington DC.
Gunter, B.G. (2002). What's wrong with the HIPC initative and what's next? Development Policy Review, 20(1), 5-24.
Hameed, A., Ashraf, H., & Chaudhary, M.A. (2008). External debt and its impact on economic and business growth in Pakistan, International Research Journal of Finance and Economics, 44, 88-97
Hasan, A., & Butt, S. (2008). Role of trade, external debt, labour force and education in economic growth empirical evidence from Pakistan by using ARDL approach. European Journal of Scientific Research, 24(4), 150-165.
Hausmann, R., & Klinger, B. (2008). Growth Diagnostic: Mexico. Inter-American Development Bank, Mimeo.
Karagol, E. (2002). The causality analysis of external debt service and GNP: The case of Turkey, Central Bank Review, 2(1), 39-64.
Krugman, P. (1988). Financing vs. forgiving a debt overhang: Some analytical issues. NBER Working Paper, No.2486. doi. 10.3386/w2486
Lora, E., & Olivera, M. (2006). Public debt and social expenditure: Friends or foes?, Inter-American Development Bank, Research Department, Technical Report, No.563. [Retrieved from].
Malik, S., Hayat, M.K., & Hayat, M.U. (2010). External debt and economic growth: Empirical evidence from Pakistan, International Research Journal of Finance and Economics, 44(1), 150-165.
Moss, T., Scott, S., Birdsall, N. (2005). Double standards on IDA and debt: The case of reclassifying Nigeria. Washington DC: Centre for Global Development. [Retrieved from].
Moyo, D. (2009). Dead Aid. New York: Farrar, Straus, and Giroux.
Mutaka, A., & Asafo, S. (2018). External debt and economic growth in Ghana: A co-integration and a vector error correction analysis. MPRA Papers, No.90463. [Retrieved from].
Mwega, F.M., Mwangi, N., & We-Ochilo, F.O. (1994). Macroeconomic constraints and medium term growth in Kenya: A three-gap analysis, AERC Research, Nairobi. [Retrieved from].
Ogunmuyiwa, M.S. (2011). Does external debt promote economic growth in Nigeria?, Current Research Journal of Economic Theory, 3(1), 29-35.
Okonkwo, C.S., & Odularu, G.O. (2012). External debt, debt burden and economic growth nexus: Empirical evidence and policy lessons from selected West African States, Conference of the Centre for the Study of African Economies (CSAE). March 18-20. Oxford, UK: St. Catherine's College.
Oleksandr, D. (2003). Non-linear impact of external debt on economic growth: The case of Post-Soviet countries. Unpublished M.A. Thesis, National University of Kyiv-Mohyla.
Oloyede, B. (2002). Principles of International Finance, Forthright Educational Publishers, Lagos.
Omotoye, O.R., Sharma, H.P., Ngassam, C., & Eseonu, M.C. (2006). Sub-Saharan Africa’s debt crisis: Analysis and forecast based on Nigeria, Managerial Finance, 32(7), 606-602.
Osei, B. (2000). Ghana: The burden of debt-service payment under structural adjustment, in S.I. Ajayi & M.S. Khan (Eds.), External Debt and Capital Flight in Sub-Saharan Africa. Washington: International Monetary Fund.
Osinubi, T.S., & Olaleru, O.E. (2006). Budget deficits, external debt and economic growth in Nigeria, Applied Econometrics and International Development, 6(3), 159-185.
Patenio, J.A.S., & Tan-Cruz, A. (2007). Economic growth and external debt servicing of the Philippines: 1981-2005. 10th National Convention on Statistics.
Patillo, C., Poirson, H., & Ricci, L. (2004). What are the channels through which external debt affects growth? IMF Working Paper, No.WP/04/15. [Retrieved from].
Rais, S.I., & Anwar, T. (2012). Public debt and economic growth in Pakistan: A time series analysis from 1972 to 2010, Academic Research International, 2(1), 535-544.
Sachs, J.D. (1989) Introduction to "developing country debt and the world economy. In Developing Country Debt and the World Economy, (pp.1-34). National Bureau of Economic Research, Inc.
Savvides, A. (1992). Investment slowdonw in development countries during the 1980’s: Debt overhang or foreing capital. Kyklos, 45(3), 363-378. doi. 10.1111/j.1467-6435.1992.tb02121.x
Shabbir, S. (2009). Does external debt affect economic growth: Evidence from developing countries. SBP Working Paper Series, No.63. [Retrieved from].
Smyth, D.J., & Hsing, Y. (1995). In search of an optimal debt ratio for economic growth, Journal of Contemporary Economic Policy, 13(4), 51-59.
Solimano, A. (1990). Macroeconomic constraints for medium-term growth and distribution: A model for Chile. Country Economics Department Working Papers, The World Bank.
Soludo, C.C. (2003). Debt poverty and inequality. in O. Iweala, & A. Muntar (Eds), The Debt Trap in Nigeria, (pp.23-74), Africa World Press NJ.
Shobande, A.O., & Etukomeni, C. (2018). Financing human development for sectorial growth: A time series analysis. Timisoara Journal of Economics and Business, 10(1), 51–67. doi. 10.1515/tjeb-2017-0004
Shobande, O. (2015). In search of inclusive growth : A concern for fiscal space. The Empirical Econometrics and Quantitative Economics Letters, 4(4), 175-185.
Shobande, O.A. (2018). Imperative of exchange rates policy and industrial growth in Nigeria: A time series analysis. Timisoara Journal of Economics and Business, 10(2), 187-198. doi. 10.1515/tjeb-2017-0012
Shobande, O.A. (2018). Modelling the dynamics of government finance on bond market return in Nigeria. Theoretical Economics Letters, 8(15), 3438–3443. doi. 10.4236/tel.2018.815210
Taylor, J.B. (2010). Reassessing discretionary fiscal policy. Journal of Economic Perspectives, 14(3), 21-36. doi. 10.1257/jep.14.3.21
Warner, A.M. (1992). Did the debt crisis cause the investment crisis, The Quarterly Journal of Economics, 107(4), 1161-1186. doi. 10.2307/2118384
Were, M. (2001). The impact of external debt on economic growth in Kenya: An empirical assessment, UNU-WIDER, Research Paper, No.DP2001/116. [Retrieved from].
Yang, J., & Nyberg, D. (2009). External debt sustainability in HIPC completion point countries: An update. IMF Working Papers, No.WP/09/128. [Retrieved from].