ABSTRACT

The study investigated on the effect of external debt on Nigerian economic growth. The objectives of the study are; to assess the impact of external debt on public and private investment within the Nigerian economy, to evaluate the effect of foreign debt on domestic economic growth in Nigerian, to investigate the impact of external debt servicing on investment development in Nigeria and to investigate the impact of foreign debt on exchange rate within the Nigeria economy. To achieve the objectives of the study, expost facto research design was adopted. The researcher adopted secondary data in getting the required information. Data were collected from CBN statistical bulletin. Conclusively, in as much as external debt burden is a reality in Nigeria, it is also true that the country cannot achieve its goal of becoming an industrialized nation by the year 2020 without external financial assistance. However, over reliance on external finance should be discouraged since this aggravates the problem of lean external sources of funds. The study therefore, recommends that external finance should be used only for projects of highest priority. This is so because it is huge external debt that threw us into the series of economic problem in the first instance. The implementation must stipulate period long enough (10 years or more) before dividends can be repatriated for investment to mature. To achieve a long term solution to external debt problem there must be vigorous promotion of the nations export trade and drastic reduction in her merchandise imports. The principal vulnerability of Nigeria is to have an open-ended burden of higher interest payment in the event of an increase in international interest rate. Nigeria should therefore seek fixed interest rate. Nigeria should devote a tangible proportion of her annual foreign exchange earnings for debt servicing. This would enable the country to accommodate the creditors’ requirements.