IMPACT OF EXTERNAL DEBT ON ECONOMIC GROWTH IN NIGERIA

This work examines the impact of external debt flow on Nigerian economic growth.

CHAPTER ONEINTRODUCTION1.1 BACKGROUND TO THE STUDYA very crucial goal for any reasonable government is to attain a sustainable economicgrowth. To attain this vital goal it may have to finance crucial infrastructure projects and to investin development of productivity. As the result of productive investments, a country shouldexperience growth in its economy and a rise in the level of GDP. However, most developed anddeveloping economies face a shortage in finance necessary to aid their developmental projects. Oneof the fastest and most available sources of financing such projects is external borrowing.Debt in general is resources or finance used in any economy or organization which is notcontributed by its users and does in any way belong to the users (Ezeabasili, 2006). Debt could bereceived from within a nation; which is internal or from outside; the nation which is external.External debt occurs when finance is borrowed to support local investment or deficit in the budgetfrom outside the country. Borrowing by economies arises as a result of insufficient domesticsavings to support the economy’s’ productive activities. Thus external debts are meant tosupplement domestic savings in financing productive activities (Oyejide, Soyede and Kayode, 1985).External borrowing has a significant impact on the growth and investment of a nation up to a pointwhere high levels of external debt servicing sets in and affects the growth as the focus moves fromfinancing private investment to repayments of debts. Pattilo, Poirson and Ricci (2002) assertedthat at low levels debt has positive effects on growth but above particular points or thresholdsaccumulated debt begins to have a negative impact on growth. Furthermore Fosu (2009) observedthat high debt service payments shifts spending away from health, educational and social sectors.This obscures the motive behind external borrowing which is to boost growth and development...

FIVE CHAPTERS