Economic implication of increasing external debt on economic growth: The case of Nigeria

Ambrose Nnaemeka Omeje; Amarachukwu Jennifer Edeh; Ravinder Rena

doi:10.15637/jlecon.2802

Authors

Ambrose Nnaemeka Omeje University of Nigeria / Nigeria 0000-0002-4847-3232
Amarachukwu Jennifer Edeh Durban University of Technology / South Africa 0009-0006-9830-5858
Ravinder Rena Durban University of Technology / South Africa 0000-0002-4156-8693

10.15637/jlecon.2802

Abstract

This research empirically investigates the economic implication of increasing external debt on economic growth in Nigeria using annual time series data from 1980-2022 and linear regression model for the estimation. Secondary data were sourced from World Bank Development Indicators. The variables used included external debt stock, investment, industry output, agriculture output, inflation, trade openness and growth rate of real gross domestic product. The estimation results show a positive and significant external debt impact on economic growth. This study's findings suggest that external debt has made a positive contribution to economic growth in Nigeria. Therefore, we recommend that external debt should be used for high-priority projects like infrastructure development to drive economic growth in the private sector. Additionally, the Nigerian government should create a business-friendly environment to attract new business opportunities and investments, both domestic and foreign. Overall, increasing foreign debt can have a significant beneficial influence on economic growth in Nigeria.

Keywords:

Economic Implication Increasing External Debt Economic Growth Nigeria Linear Regression Model

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