Abstract Book of the 6th World Conference on Management and Economics
Year: 2025
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External Debt-Economic Growth Nexus in Developing Economies
Oghenetega Odioko, Eric (Kwasi) Addo-Osei, Yusuf Ibrahim
ABSTRACT:
Rising debts are a crucial determinant of the level of economic growth in all countries. This study aims to ascertain the nexus, if any, between external debt management and growth in developing economies in Sub-Saharan Africa. This research uses Nigeria as a case study and complements the existing evidence on the effects of external debt in Nigeria over time. The study set out to test for the presence or absence of a long-run relationship between external debt and economic growth. The methodology employed robust econometric techniques to ensure reliable and statistically significant findings. In an advancement over those studies which lumped together the components of external debt, this research work specifically tested for the effects of external debt burden as well as external debt service payments on economic growth in Nigeria. An empirical investigation was conducted using time series data on Real Gross Domestic Product, External Debt Stock, External Debt Payments, Exchange Rate, Inflation Rate, and Interest Rate. Results for the period 1980-2013 indicated that there is a long-run relationship between external debt and economic growth in Nigeria. Furthermore, a 1-unit change in external debt stock would cause a -0.37 unit change in economic growth, while a 1-unit change in external debt service payment would cause a -0.22 unit change in economic growth. Based on these results, the government should focus on other forms of spurring economic growth apart from external debt sourcing. In addition, the government should aim at increasing the potential output of the economy.
Keywords: external debt, economic growth, developing economies