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The Economics and Finance Letters

June 2019, Volume 6, 2, pp 210-221

Does External Borrowing Affect Economic Growth? A Revisit of the Age-Long Debate for Nigeria

Yakubu Dauda Ademola


Wasiu Akintunde Yusuf


Kenneth Onyeka Diyoke

Yakubu Dauda Ademola 1

Wasiu Akintunde Yusuf 2 Kenneth Onyeka Diyoke 2 

  1. Central Bank of Nigeria (HQTR), Abuja FCT, Nigeria. 1

  2. Nile University of Nigeria, Abuja FCT, Nigeria. 2

Pages: 210-221

DOI: 10.18488/journal.29.2019.62.210.221

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Article History:

Received: 11 September, 2019
Revised: 16 October, 2019
Accepted: 19 November, 2019
Published: 30 December, 2019


Given the recent phenomenon of government at all levels in Nigeria resorting to external loans to finance their annual budget deficits, the study then examined the implications of the external borrowing on the economic growth in Nigeria, using an Autoregressive Distributed Lag co-integration (ARDL) approach. Times series data spanning from 1987 to 2018 were collected from Central Bank of Nigeria and Debt Management Office. Corroborating some existing empirical evidence, the study finds a significant and positive effect of external debt stock on the economic growth in Nigeria, which is represented by gross domestic product growth rate (GDPRATE), and debt servicing impacts negatively on the economic growth both at the short run and the long run. The value of ECM-1 is -0.32281 indicating that the speed of adjustment from the short-run to the long run takes 32.28% and this is significant at 1%. The governments should channel these external loans in the value added sectors of the economy in order to boost employment, output, sustainable and collective growth of the economy. It therefore advises various organs of the government in charge of fiscal policy and policy implementation to beam their searchlights and oversights on the proper utilization of these loans to avoid diversion, misappropriation and non-implementation of vital projects.
Contribution/ Originality
This is one of the few studies that actually adopted the scholarly evidences in the model of debt overhang in the theory of Krugman (1988); Sachs (1988); Elbadawi et al. (1997) and Chowdhury (2001); however, only a few scholars have used ARDL technique despite its robustness in ascertaining the long run and short-run of its estimated parameters (Pesaran and Shin, 1999; Pesaran et al., 2001).


ARDL, Budget deficits, Debt management office, ECM, External debt.




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This study received no specific financial support.

Competing Interests:

The authors declare that they have no competing interests.


All authors contributed equally to the conception and design of the study.

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