Analysis of the effect of External Public Debt on Economic Growth in Nigeria
This study examines the effect of external public debt on economic growth in Nigeria utilizing time series secondary data extracted from Debt Management Office (DMO), Central Bank of Nigeria (CBN) Statistical Bulletin and National Bureau of Statistics (NBS) for the periods of 2007Q1 to 2020Q4. Employing the econometric methodology of the Johansen Co integration and Vector Error Correction Model (VECM), the study establishes long run relationships among the variables. The results show that while the relationship between bilateral debt and growth is negative and significant, multilateral debt has a positive and insignificant relationship with economic growth. The result further indicates that the relationship between commercial debt and economic growth is also positive and insignificant. Based on the findings of this study, it is recommended that: the Federal Government should give less priority to bilateral loans in funding growth through its deficit financing; the current approach to funding budget deficit through borrowing from multilateral source which provide long-term loan at a very low interest rate with long amortization period should be sustained; the aggressive use of commercial loans to fund deficit should be maintained subject to cost and risk involved. Keywords: External debt, multilateral debt, commercial debt, bilateral debt, economic growth JEL Classification: C32, E02, E12, H63