Debt servicing and economic growth in Nigeria: An empirical investigation
AbstractIn this study we reviewed and analyse the effect of external debt service payment practices on sustainable economic growth and development with particular emphasis on Nigeria. To achieve the objective of this research, we use debt payment to Multilateral Financial creditors, Paris club creditors,
London club creditors, Promissory notes holder and Other creditors (Non-Paris Creditors) as variables to statistically determine whether they have inverse relationship with gross domestic product (GDP) and
gross fixed capital formation at current market prices (GFCF). Data pertaining to 1981 through 2004 were used with the ordinary least square multiple regression method. We found that debt payment to London club creditors, Paris club creditors, promissory notes holders and Other creditors have significant impact on the GDP and GFCF. Debt payment to Paris club creditors and debt payment to promissory notes holders are positively related to GDP and GFCF, while debt payment to London club creditors and Other creditors shows a negative significant relation to GDP and GFCF. We therefore recommend among others that government should ensure that any loan deal with either London club or Other creditors should be deal that will open Nigeria to greater trade and investment and can stimulate
the private sector, since debt payment to these two creditors impact negatively on our economic growth.