Impact of Foreign Debt on Economic Growth in Nigeria (1990 – 2023)

This research study investigated empirically external debt and economic growth nexus in Nigeria using annual time series data from 1990 to 2023. The study employed the Augmented Dickey-Fuller unit root test, Autoregressive Distributed Lag (ARDL) Bounds Test for cointegration and the Parsimonious Error Correction Model (ECM) to link the disequilibrium in the short run to the long run. From the findings, external debt exerts a positive effect of 0.834% and 0.322% in the long and short run respectively. On the other hand, external debt exerts an adverse effect of -0.091% and -0.047% in the long and short run respectively. From the Error Correction Model, 88.9% of the short run disequilibrium in the model for external debt is corrected annually to bring the model to a long run equilibrium, while 66.9% of the short run disequilibrium in the model for external debt servicing is corrected annually to bring the model to a long run equilibrium. The independent variables used in the models for external debt and external debt servicing had an explanatory power of 84.8% and 94.7% respectively. The study recommended amongst others that loans contracted should continue to be invested in profitable ventures or projects that are self-liquidating while on the external debt servicing part, the interest payable on external loans should be minimum as this would ensure that amounts set aside for external debt servicing are reduced to the barest minimum.