The Impact of Debt Servicing on Economic Growth in Nigeria

Any country in the globe targets to achieve economic growth and development. Thus, this can only happen if a country has an abundant resource and utilizes them efficiently and effectively. In developing countries, like Nigeria, the resources to finance the optimal level of economic growth are in short supply; due to low domestic savings, low tax revenues, low productivity and light foreign exchange earnings. The study investigates the impact of debt servicing on economic growth in Nigeria from 1980 to 2022. The Zivot-Andrew unit root test indicates that real gross domestic product, interest rate, external debt and exchange rate are integrated of order one while external debt servicing is integrated of order zero. The study employed nonlinear ARDL model and the result show that external debt servicing and exchange rate have positive and statistically significant effect on the real gross domestic product while external debt has a negative and statistically significant effect on the real gross domestic product. Therefore, the current study concludes that there exists an asymmetry impact in the long-run of debt servicing in the Nigerian economy. The study recommends that Nigerian debt be it internal or external should be utilize judiciously and investment should be made so that the economic growth could be achieved.