Global Advanced Research Journal of Management and Business Studies (ISSN: 2315-5086) June 2016 Vol. 3(12), pp 576-582

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Original Research Articles

How do External Public Loan affect Economic Growth in Nigeria

Ugwu Okereke J.  Ph.D

Department of Banking and Finance, Ebonyi State University

Accepted 10 December 2014


Abstract 

This study investigated whether or not external loans (debts) drive economic growth in Nigeria using an econometric approach to investigate the significant effect of economic relationship between external loan stock and economic growth in Nigeria. The study ascertained whether there is true significant efftect of Nigeria’s borrowing with london club of creditors (LC), paris club of creditor (PC) and Multilateral creditors (MC) on economic growth proxied by Gross Domestic product (GDP) in Nigeria for the period 1999-2013. The data for the study were mainly secondary data sourced from Central Bank of Nigeria Annual Report and Statistical Bulletin, Debt Management Office (DMO) and Federal Office of Statistics (FOS). The data were equally subjected to statistical analysis with the use of Coefficient of Multiple Determination, F-Statistics and Durbin Watson statistics. The t-test statistics was employed in testing the hypotheses.The results of the study established that an increase in Nigeria’s borrowing with London Club of creditors (LC), Paris Club of Creditors (PC) and Multilateral Creditors (MC) bring about increase in Gross Domestic Product (GDP) in Nigeria. It was also established that there exists significnat effects of the external loan variables (LC, PC and MC) on economic growth variable (GDP). The implication of the study is that if the governement can contract loan for the promotion of economic growth through investment in capital formation and other social overhead capital, will on the long run affect the economic growth in Nigeria positively. We therefore recommend that there is need for fiscal discipline and high sense of responsibility in the economy as it relates to handling of public funds. In view of the negative contribution of external debt to economic growth, it is further recommended among others, that cost-benefit analysis, prioritization of projects, absorptive capacity of the economy, investment on productive self-financing projects, probity as well as accountability in handling government resources and debt sustainability should form the basis for contracting external debt finance. 

Keywords: External Debt, Economic Growth, Paris Club of Creditors, London Club   of Creditors, Multilateral Creditors  





 








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