Impact Of External Debt On Economic Growth In Nigeria: Role Of Institutional Quality

Abstract

The impact of foreign debt on Nigeria's economic development is empirically examined in this research, contingent on the function of institutional quality. The goal of the research is to assess the impact of foreign debt on economic development objectively. We utilized secondary data from the International Risk Guide and the World Development Indicators. Autoregressive Distributed Lag analysis was used to examine the data (ARDL). According to the research, Nigeria's economic growth, foreign debt, currency rate, capital flight, gross capital creation, and external debt-corruption all have long-term equilibrium relationships. The results showed that external debt (LEXD) has a beneficial effect on Nigeria's economic development in the medium and long term, whereas external debt-corruption (LEXD*COR) has a negative effect that is statistically significant at the 5% level of significance. Furthermore, at the 5% level of significance, the paired Granger causality test showed that economic growth (LGDP) does not granger cause external debt (LEXD), but external debt (LEXD) granger causes GDP. Among other things, the report suggests that the Federal Government borrow money in accordance with the Fiscal Responsibility Act. This is crucial because it will prevent the government from going over the loan cap and assist guide government financing toward appropriate investments. When it comes to loan acquisition, disbursement, and project execution, the government should bolster public institutions and implement strong anti-corruption policies.