Relationship between External Debt Management Policies and Economic Growth in Nigeria (1970-2006)

Abstract

This study sought to appraise the relationship between external debt management policies on the economic growth of Nigeria from 1970-2006. One null hypothesis was formulated to determine the effect of external debt on Gross domestic investment, exchange rate, fiscal deficit, and terms of trade. Ex-post facto research design was adopted for the study. Ordinary least square multiple regression technique was used to analyzed data gathered for the study. The result of the findings revealed that, GDP, exchange rate, fiscal deficit, London Interbank offered rate, and terms of trade are the major determinants of external debt in Nigeria. The severity of the debt within the period is reflected in the country’s inability to meet the debt service obligations particularly scheduled debt services in relation to its foreign currency earnings, it explains why the country had rescheduled  its debt from time to time (first in 1986, 1989, 1991, and last in October 2000). Recommendations are made that the federal government should lay down well considered guideline for external loans. Defining the purpose, duration, moratorium requirements and commitments, negotiation fees etc including the conditions under which the government can approve and guarantee external loans. Also In view of the debt relief, government should ensure that spending impact on poverty reduction halts HIV/AIDS and malaria and addresses child and material mortality. Thus, the government should priorities its spending on health, education, water, infrastructure, power and agriculture.