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EXTERNAL DEBT BURDEN AND THE ECONOMIC GROWTH IN NIGERIA
1.1 BACKGROUND OF STUDY
1.2 STATEMENT OF THE PROBLEM
The issue of external debt in Nigeria has become an immense status bestriding the main stream of international economy, and politics. Foreign aids are no longer used as instrument of assistance but as a weapon of oppression, suppression and perpetual under development. The need to examine and hence, utilize the machinery of foreign debt is anchored on a number of challenges and this includes:
(i) Underdevelopment of the Nigeria Economy
(ii) The unreliability of Domestic debt facilities
(iii) Effect of external debt burden on Gross domestic product GDP)
Lack of capital in the country has been the major cause of underdevelopment in Nigeria, as a. result there is need to inject funds into the system from other economies so as to keep up the growth in the country This can easily be sought from external financial institutions, Domestic debt in Nigeria have not only been characterized by its short term nature, but it has also by fluctuations, The reality on grounds that Nigeria firms and investors prefer to invest their idle funds in company shares and treasury bills than in Government bonds. Economic growth over the years has been in Government bonds, Economic growth over the years has been identified as a long term project. In this direction, the need fur external debt cannot be understated as a reliable substitute to the usually high interest charge domestic debt which in most times does not exceed a year. The burden and dynamics of external debt shows that they do not contribute significantly to financing economic growth in Nigeria as in most case, debts accumulates because of the servicing and principal itself, The burden of external debt could constitute negative impact on G.DP of Nigeria as this is a measure of economic growth.
1.3 OBJECTIVES OF TUE STUDY
The central objective of the research is to assess the impact of external debt burden on the Nigeria economic growth. Other specific objective includes:
(i) To measure the impact of external debt on the Growth of the nation;
(ii) To evaluate the significance of external debt as against domestic debt in Nigeria;
(iii) To measure the effect of external debt burden on GDP level.
1.4 RESEARCH QUESTIONS
As a basis upon which this study is conducted, the following research questions are relevant:
(i) What is the impact of external debt on the Growth of the nation?
(ii) To what extent has external debt been significant over domestic debt?
(iii) Is there any relationship between External debt burden and GDP level?
1.5 STATEMENT OF HYPOTHESIS
For the purpose of evaluating or in order to efficiently and objectively analyze or achieve the above objective; the hypothesis is formulated thus:
Ho1: External debt does not have impact on the growth of the Nigeria economy.
Ho2: External debt is not more significant than domestic debt in Nigeria.
Ho3: There is no relationship between external debt and GDP level in Nigeria.
1.6 SCOPE OF STUDY
The scope of study will be impact of external debt burden on the Nigeria Economic Growth between 2002 - 2013, which is a period of 12 years. The study covers the whole economy of Nigeria and will be limited to evaluation of external debt burden and impact on economic growth of Nigeria. One problem of this study is the unreliability of Domestic debt facilities. An objective is to evaluate the relevance of external debt over domestic debt.
The area of population is Nigeria and the variables to be used are
Gross domestic product (GDP), Gross domestic product growth rate (GDP growth rate), Domestic debt, External debt, Real interest rate.
1.7 SIGNIFICANCE OF THE STUDY
Having identified some cause of debt, the various management strategies that have been adopted by successive Government in Nigeria; and also having examined the position of the economy vis-a-vis. the burden, this work would particularly, be relevant to scholars, economic policy formulators and Government investors, foreign international organizations, private, individuals and firms, future researchers and so on as the list is unlimited.
The following ways below identifies the significance of the study:
- To understand the correlation between external debt burden and Growth of the economy.
- To serve as a guide for future governmental policy indebt minimization and control.
- Recommended appropriate yardstick for further research and documentation on Nigeria’s external debt crises.
- The study will be helpful to’ citizens informing them of how the impact of external debt will improve their Output thereby their standard of living.
1.8 LIMITATIONS OF.STUDY