A DISAGGREGATED ANALYSIS OF THE EFFECT OF EXTERNAL PUBLIC DEBT ON ECONOMIC GROWTH IN NIGERIA

This study examines the effect of disaggregated external public debt on economic growth in Nigeria. The study uses an ex post facto research design. Secondary data was collected from Debt Management Office (DMO) of Nigeria for fifty-five quarters spanning through 2007Q1 to 2020Q3. Employing the econometric methodology of the Johansen Co integration and Vector Error Correction Model (VECM), the study establishes long run relationships among the variables. The results show that while the relationship between bilateral debt and growth is positive and significant, multilateral debt has a negative and insignificant relationship with economic growth. The result further indicates that the relationship between commercial debt and economic growth is negative and significant. Based on the findings of this study, it is recommended that: the Federal Government should give more priority to bilateral loans in funding growth through its deficit financing; the recent aggressive use of commercial loans to fund deficit should be reduced and restricted to the refinancing of maturities and extension of yield curve; the Federal Government should continue borrowing from the multilateral sources due to its strong influence in lowering the average cost of borrowing for government, subject to Nigerian envelop; and, that a comprehensive analysis of the effect of disaggregated public debt on the economy needs to be carried out on a regular basis by the Debt Management Office.