AN EMPIRICAL REASSESSMENT OF EXTERNAL DEBT DETERMINANTS IN NIGERIA: ARDL MODELLING APPROACH
Mustapha Muhammad Abdullahi (PhD) and Hussaini Aliyu Jibril
Volume 9 Issue 2
Abstract
The study employs Autoregressive Distributed Lag (ARDL) estimation technique to examine the external debt’s determinants in Nigeria. Particularly, it investigates the impact of debt servicing, economic growth, gross domestic savings, and military expenditure on external debt using time series data covering 1981 to 2021. The result reveals the existence of cointegration relationship between external debt and its determinants in the country. Findings in the long run show a positive and statistically significant impact of debt servicing on external debt accumulation in Nigeria. On the contrary, in the short run, an increase in debt servicing obligations correlates with a reduction in the country's external debt levels. Similarly, long-term findings indicate that GDP, gross domestic savings, and military expenditure exert a negative impact on external debt in Nigeria. This suggests that as Nigeria's GDP, gross domestic savings, and military expenditure grow, they consistently contribute to decreasing both long-term and short-term external debt levels. Based on the study's findings, the study recommends the need for prudent management of external debt servicing obligations due to their significant long-run impact. Policy makers should prioritize economic policies that promote sustainable GDP growth to reduce the reliance on external borrowing. Encouraging domestic savings and investment is crucial to decrease dependency on external financing. Additionally, policymakers should carefully evaluate the implications of increases in military expenditure on external debt levels, ensuring that such expenses align with national security needs and are financed strategically. Keywords: External Debt, Economic Growth, Debt Servicing, Gross Domestic Saving, Military Expenditure
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