EXTERNAL DEBT AND ITS IMPACT ON PRIVATE SECTOR GROWTH IN NIGERIA (1995-2019): A VECTOR ERROR CORRECTION APPROACH

Priye Werigbelegha Andabai (PhD)

Abstract


The study examined external debt and its impact on private sector growth in Nigeria; for the period 1995-2019. Secondary data were  used and collected from Central Bank of Nigeria Statistical Bulletin, 2019. The study used  private sector growth and employs as the dependent variable; whereas, external debt service payments, external debt stock and exchange rate are use as independent variables to measure external debt in Nigeria. Hypotheses were formulated and tested using time series econometric techniques. The study reveals a significant impact of external debt service payments on private sector growth in Nigeria. External debt stock has a significant impact on private sector growth in Nigeria. Exchange rate has a significant impact on private sector growth in Nigeria. The coefficient of determination indicates that about 65% of the variations in private sector growth can be explain by changes in external debt variables (EDSP, EDS, EXR) in Nigeria. The study concludes that external debt has significantly impacted on private sector growth in Nigeria. The study recommends that Government and policy makers should be consistency on the reasons for the borrowed funds and the actual use of the funds. This will help to reduce the problem of debt service payments. The authorities should be aware of the nature and structure of the facility before borrowing. This would help reduce the challenges of debt service payments.Nigeria should use her accumulated external foreign reserves instead of incurring more external debts, as this will ensure increase in private sector growth and reduce capital flights through repayments of debts to external sources.


Keywords


Impact, External Debt, Private Sector, Growth. Nigeria

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