IMPACT OF FOREIGN DEBTS ON ECONOMIC DEVELOPMENT IN NIGERIA: AN ECONOMETRIC APPROACH (1960-2014)
Abstract
The access to external finance can be extremely helpful in fostering the developmental process by bridging the investment-savings gap as well as the foreign exchange gap in most developing economies like Nigeria. This study, therefore, econometrically examines the impact of foreign debts on economic development in Nigeria covering 1960 to 2014. The objectives include an assessment of the validity (or otherwise) and implications of both debt overhang and crowding out hypotheses in Nigeria’s economy. The study employed Augmented Dickey-Fuller unit root test, Engel-Granger test for co-integration and Dynamic OLS techniques. The study found that both assumptions are valid in Nigeria; thus, recommend that the Nigeria Debt Management Office (DMO) should explore debt-equity swap in the management of the country’s foreign debt which could improve the country’s defense against dangers of the economic cycle.
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