The Effect of Foreign Debt on the Economic Growth

Abstract

This study examined the effect of External Debt on the economic growth of Nigeria. Secondary data collected from world bank national data, central bank of Nigeria bulletin, Nigeria’s debt management office annual report, Ministry of finance for a period of 23 years,(1995-2017), and ordinary least square statistical tool was used to test the relationship between Nigeria’s external debt and its economic growth. The study found that there is a positive, but insignificant relationship between foreign debt stock (FDST) and Gross Domestic Product, a negative, and insignificant or weak relationship between foreign debt servicing (FDSR) and Gross Domestic Product (GDP), and a positive and significant relationship between Inflation Rate (INFR) and Gross Domestic Product (GDP).The study concluded that the aggregate of Nigeria’s external debt does significantly affect its economic growth. The study recommends that acquisition of foreign debt should be exclusively on economic considerations