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2022-01-15
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Copyright (c) 2022 Dr Austin C. Anyanwu, Prof P.N. Nnamocha, Dr Joseph K. Naakuu
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External Debt Service And Nigeria'S Macroeconomic Performance (1981-2019)
Dr Austin C. Anyanwu
Imo State University, Owerri
Prof P.N. Nnamocha
Dr Joseph K. Naakuu
Keywords: External Debt Service, Real Gross Domestic Product, Exchange Rate, Economic growth, Vector Error Correction Model
Abstract
This research studied external debt service and Nigeria’s macroeconomic performance from 1981 to 2019. The macroeconomic performance indicators employed were Real Gross Domestic Product and Exchange rate while external debt servicing is the independent variable. The data were sourced from the Central Bank of Nigeria (CBN) Statistical Bulletin (2019 edition) and were analyzed using the Vector Error Correction Model. Some other robust econometric tools such as Granger causality, impulse response function, variance decomposition and the stability tests were conducted. The findings revealed that a significant relationship existed between external debt service and Nigeria’s real gross domestic product and external debt service decreased exchange rate. The error correction coefficients showed significant speed of adjustments to long run equilibrium. Based on the analysis, the study concluded that Nigeria’s external debt service profile has increased growth of the macro-economy owing to the positive effect of external debt service on real GDP in the model. The implication is that Government has evolved more efficient ways of channeling these borrowed funds to the productive sectors. Thus, the country should devise a more efficient way of servicing her external loan obligations to avoid huge debt burden. The study further recommended that government should engage in massive production so as to meet the long term objective of borrowing externally which will ease the strain on exchange rate and also further the strength of the local currency as well as focus more on the real sector which is the productive sector of the economy.
Author Biographies
Prof P.N. Nnamocha
Dean, Faculty of Social Sciences, Imo State University
Dr Joseph K. Naakuu
Principal Lecturer, General Studies,
Ken Saro-Wiwa Polytechnic, Bori, Rivers State