External Debt and Economic Growth in Nigeria: An Implication for Debt Overhang Theory

In the recent times, several agitations have surrounded the huge external debts incurred by the Mohammed Buhari led government in the past four years, and the current approval of $22.7 billion external debt by the Nigerian National Assembly has sparked off debates among scholars and policymakers.Against this backdrop this study critically examined the contribution of external debts to economic growth in Nigeria from 1981 to 2018 via the application of Autoregressive Distributed Lag model and Bounds Testing techniques.The significant contributions of this study to the field of research are as follows; past economic growth did not contribute to the present economic growth in Nigeria.In the same vein, external debt caused a significant setback to economic growth in Nigeria during the periods under investigation.Meanwhile, debt servicing and economic growth had a direct relationship in the country.Exchange rate contributed a negative impact on economic growth.Whereas, the foreign reserves had a positive and significant impact on economic growth in Nigeria.Consequently, the emergence of these crucial findings make this study to recommend the following for the policy makers in Nigeria in particular, and other highly indebted countries in Africa that past external debts in Nigeria are inhibitors to economic growth in the country.Therefore, policymakers in Nigeria should explore other means of financing country`s deficit budget rather than external debt.