An Empirical Analysis of the Impact of Debt on the Nigerian Economy

Abstract

The study assessed the Impact of Debt on selected macroeconomic  indicators in Nigerian Economy. To achieve the aim of the study the  researcher used External Debt Stock, External Debt service payment and Exchange Rate as variables to determine their effect on Gross Domestic Product (GDP), and Gross Fixed Capital Formation (GFCF) for the period 1980-2010. Data for the study were secondary data drawn from Debt Management Office, CBN Statistical Bulletin, and internet materials and analyzed with Linear Regression. The study found that Nigeria’s external debt stock has a significant effect on her economic growth. It also revealed that there is a significant relationship between Nigeria’s Debt service  payment and her Gross Fixed Capital Formation. The researcher therefore recommend that government should avoid borrowing as much as possible however, since developing countries need to borrow at one time or the  other to supplement internal savings, borrowing then should become an option only when high priority projects are being considered and borrowed funds should be strictly monitored and evaluated to ensure they are used for the purpose for which they are borrowed and government should make policies that will promote industrialization which will in turn attract foreign direct investment.