This study seeks to ascertain the impact of fiscal deficit on external debt in Nigeria with a focus on determining the long run relationship between fiscal deficit and external debt, as well as to ascertain the direction of causality between fiscal deficit and external debt. The model employed in this study is the Error Correction Mechanism; Granger causality test was used to ascertain the direction of causality. The time frame for this study spanned between the years 1981-2019. This study found that fiscal deficit is not a significant determinant of external debt in Nigeria. Also, the variables of gross domestic product, degree of openness, exchange rate was found to be insignificant factors determining external debt except inflation which was significant in determining external debt in Nigeria. Furthermore, there was neither a uni-directional nor bi-directional causality between external debt and fiscal deficit. Although, there is causality flowing from budget deficit and degree of openness as well as budget deficit and gross domestic product. However, it was suggested that policies be implemented that will enhance the channeling of funds from the external sector to productive sectors of the economy in order to ensure diversification and revenue generation thereby ultimately lessening the external debt burden that Nigeria is faced with. Finally, there is need for fiscal discipline and fiscal prudence if fiscal deficits would be a true determinant of the size of external debt accumulated in the country.
Citation: Shofade Oladapo Daniel and Kazeem Adebola Ibrahim (2021) Fiscal Deficit and External Debt: The Nigerian Experience, International Journal of Development and Economic Sustainability, Vol.9, No.3, pp.1-18
The study set out to investigate the effect of external debt on Nigerian economy. Time series data for twenty-two years that span from 1994 to 2015 were obtained and subjected to test using Ordinary least square regression (OLS) for the hypotheses formulated for the study. The study revealed some forms of long run relationship between Gross domestic product, on the one part and external debt, external debt service and export, on the other part but of particular importance is the long run marginal negative relationship between external debt and Gross domestic product. The study further confirmed causality, from predictors to dependent variable and recommended that there should be a ban on external debt in Nigeria, for some time. However, where external debt is unavoidably necessary for productive venture/investment that can boost export, it should be for such specific venture/investment and should be well managed to pay back the external debt and its associated service cost, thereby justifying the decision for such external debt without further stress on the economy.
This study examined the effect of public debt on economic growth of Nigeria. Specifically, the study determined the impact of domestic debt on the economic growth of Nigeria; assessed the effect of external debt on the economic growth of Nigeria and analyzed the relationship public debt and the economic growth of Nigeria. Secondary time series data spanning thirty-seven years (1982-2018) was gathered in the study. Data gathered in the study was estimated using descriptive statistics, unit root test, Johansen co-integration test and vector error correction model. Discoveries from the study suggests that external debt exerts a negative long run and short run effect on economic growth of Nigeria and domestic debt was ascertained to exert positive long run and short run effect on economic growth of Nigeria. Based on these findings, the study suggested that policy makers should integrate appropriate measures towards ensuring suitable management of domestic debts; government should ensure that contracted national debts are directed towards encouraging investment in the country and government through necessary monitoring committees should ensure that national debts are directed toward the provision of basic amenities and services required for the development of communities and societies of the nation.
The aim of this study is to verify the empirical relationship between the structure of Nigeria public debts and the nation’s economic performance over the period 1990-2015. The study employ relevant data from CBN statistical bulletin of various issues and the analysis are based on two regression techniques simple and multiple. The simple regression result indicates significant positive relationship at 0.05 level between aggregate public debt and Nigeria GDP. Multiple regression analysis indicate that while the multiple correlation coefficient is significant at 0.05 level, external debt in negatively signed while domestic debt signs positively with Nigeria’s GDP. The regression coefficients are all significant at 0.05 levels with a coefficient of determination (R2) value of 94.5 percent. Given the result, the study concludes that Nigeria public debts are valuable in predicting partially variations in Nigeria’s economic performance. It recommends that Nigeria should emphasis more of domestic debts in place of external debts. This should be done through development of new and varied money and capital markets products as well as enhanced internationalization of the operations of the Nigeria’s capital and money markets. It also recommended that development of indigenous technological potential be given priority to boost Nigeria technology and eventually economic independence.
This research work was aimed at ascertaining the impact of external debt on economic growth in Nigeria. Ex-post facto research design was adopted for the study. While data on Gross Domestic Product (GDP), External Debt Stock and External Debt Service Payment were obtained from World Bank International Debt Statistics, Exchange Rate data were collected from Central Bank of Nigeria Statistical Bulletin, 2013. The period of study was 1980-2013. Model was formulated and data were analyzed using Ordinary Least Square. Diagnostic tests were conducted using Augmented Dick Fuller Unit Root Test, Co-integration and Error Correction Model. The independent variable was GDP, while the explanatory variables were External Debt Stock, External Debt Service Payment and Exchange Rate. We discovered that External Debt had a positive relationship with Gross Domestic Product at short run, but a negative relationship at long run. Also, while External Debt Service Payment had negative relationship with Gross Domestic Product, Exchange Rate had a positive relationship with it. The paper concluded that exchange rate fluctuation had positive impact on the Nigerian economy while external debt stock and debt service payment had negative impact on the same economy. The study recommended amongst others, that Debt Management Office should set mechanism in motion to ensure that loans were utilized for purposes for which they were acquired as well as set a ceiling for borrowing for states and federal governments based on well-defined criteria.
EXTERNAL DEBT ACCUMULATIONS AND MANAGEMENT IN DEVELOPING ECONOMIES: A COMPARATIVE STUDY OF SELECTED SUB-SAHARAN AFRICAN AND LATIN AMERICAN COUNTRIES. (Published)
The issue of debt crisis and management have constituted major challenges to the developing economies of the world. This study examined external debt accumulations and management strategies adopted by developing countries using Nigeria, Ghana and Brazil. The study covers a ten year period, 2002-2011. This work is both conceptual and empirical. Data were gathered through of the documentations/releases of relevant agencies such as the Debt Management Offices and Central Banks of the countries studied. The study attributed the debt crisis in these nations primarily to mismanagement of credit facilities, weak economic base, overdependence on foreign aids, weak debts contractual agreements and ineffective debt managements strategies. The paper recommends among other things that developing economies should place less emphasis on external borrowings as most of the credits are given under very harsh conditions, emphasis should be placed on prudent resource management. The government should rather pursue deliberate policies that will ensure the diversification of their economy by developing other productive sectors of the economies, while external debts should be seen as a last resort and must be contracted to finance only self- sustaining projects that will stimulate real sector and other factors of production needed to guarantee enduring economic development.
EXTERNAL DEBT ACCUMULATIONS AND MANAGEMENT IN DEVELOPING ECONOMIES- A COMPARATIVE STUDY OF SELECTED SUB-SAHARAN AFRICA AND LATIN AMERICA COUNTRIES. (Published)
The issue of debt crisis and management have constituted major challenges to the developing economies of the world. This paper has x-rayed issues of external debt accumulations and management strategies adopted by developing countries using Nigeria, Ghana and Brazil economies. The study covers 2002-2011 and reviews the issues that led to the debt accumulations countries and how they have managed the crisis via policy formulation and implementations. This work is both conceptual and empirical. Data were gathered through of the economic statistics releases of relevant agencies and reveiw records sourced via the internet and other scholarly publications relevant to the topic. The study attributed the debt crisis in these nations primarily to mismanagement of credit facilities, weak economic base, overdependence on foreign aids, weak debts contractual agreements and ineffective debt managements strategies. The paper recommends among other things that developing economies should place less emphasis on external borrowings as most of the credits are given under very harsh conditions, emphasis should be placed on prudent resource management. The government should rather pursue deliberate policies that will ensure the diversification of their economy by developing other productive sectors of the economies, while external debts should be seen as a last resort and must be contracted to finance only self- sustaining projects that will stimulate real sector and other factors of production needed to guarantee enduring economic development.