AN ANALYSIS OF EXTERNAL DEBT ON ECONOMIC GROWTH IN NIGERIA (1992-2010). A RESEARCH PROJECT MATERIAL ON BANKING AND FINANCE
This research work is titled “An Analysis of External Debt on Economic Growth in Nigeria. “(1992-2010).
External borrowing is a source through which many countries sources revenues for development and economic growth of their countries. But this revenue can only solve the problems of gross under development when judiciously utilized.
The burden of Nigeria external debt is much and the state of economic growth in the country is hampered due to debt crisis.
The debt problem facing Nigeria is concerned on how to stop incurring more debt and device a way of servicing the existing debt without causing some distortions in the economy. For effective and efficient debt servicing, factors that hiders it has to be taken into consideration i.e. domestic financing polices, debt management and external economic environment.
External Debt affects the economic growth, and employment rate in the country. However, from my analysis of test of correlation, using Pearson’s product-moment correlation coefficient, External Debt affect money supplied negatively. This means external debt has a significant negative impact on money supply. So, Nigeria can solicit for debt cancellation from its creditors and also adopt debt management as part of its macro economic policies of the nation and finally engage in productive project.
1.1 BACKGROUND OF THE STUDY
Securing external loan is inevitable for a government when the economy faces financial crisis. There is no iota of doubt that Nigeria, just as other developing countries, is facing serious debt crisis. It has therefore emphasized the use of external loans for financing public expenditure (National library 2006).
It is generally expected that developing countries, facing a scarcity of capital, will acquire external debt to supplement domestic saving (pattillo,etal 2002;safdari; and meherizi 2011).
According to global development finance (2009), “every country in the world aims at achieving economic growth and development”. However this is only possible if a country has adequate resources. In developing countries especially those in sub Sahara African the resources to finance the optimal level of economic growth and development are in short supply. This ploughed with problem of low domestic savings, low tax revenue, low productivity and meager foreign exchanger earnings.
Basically, for these reason, many developing counties yearning for economics growth inevitably resort to external financing to bridge the gap between their savings and investments. In the process of obtaining Finance from abroad, a country may consider several options: grants, foreign investment and loans (concessional and non- concessional ) in that order, However mix of these capital inflow in varying proportion could be obtained depending on the socio- economic and political situation in a country(World Bank 2009).