Abstract: This research investigates the impact of external debt on economic growth in Nigeria from 1980-2014 using the Vector Error Correction model. The empirical findings through the impulse response analysis and variance decomposition have revealed that external debt service payment negatively impacts real GDP per capital growth in Nigeria significantly, signaling the existence of the debt overhang impact on economic growth. Furthermore, the Granger Causality/Wald test revealed a unidirectional causation from real GDP to external debt stock and from external debt service payment to real GDP. It is recommended that external debt should be discouraged for it cannot be relied on by government for the promotion of economic growth because of its retarding influence on growth. Other sources of revenue, such as taxation, and exports promotion should be strengthened and focused on in order to generate the needed funds for the Nigeria’s indispensable expenditures to bring about the desired growth.
Keywords: External Debt, Economic Growth, Impulse Response, Variance Decomposition, Wald Causality test.
Title: EXTERNAL DEBT AND ECONOMIC GROWTH IN NIGERIA: A Vector Auto-Regression (VAR) Approach
Author: Adeniran, Abraham Oluwapelumi, Azeez, Muhyideen Iyiola, Aremu, John Abiodun
International Journal of Management and Commerce Innovations
ISSN 2348-7585 (Online)
Research Publish Journals
