Debt-Growth Bond in Nigeria: Structural Break Analysis

Emmanuel O. Okon; Halirat Umar

doi:10.46281/asfbr.v2i1.6

Emmanuel O. Okon Department of Economics, Kogi State University, Anyigba, Kogi State, Nigeria
Halirat Umar Department of Economics, Kogi State University, Anyigba, Kogi State, Nigeria

DOI: https://doi.org/10.46281/asfbr.v2i1.6

Keywords: Debt, Growth, Structural Break, Similarity of Error Variances Test, Nigeria

Abstract

This study examined the structural break relationship between external debt and economic growth from 1985 to 2016 with a view to examine the effect of external debt relief on economic growth in Nigeria. The study used the ordinary least square technique. In addition, it employed the chow test and also adopted the similarity of error variances test in its analysis. From the results and analysis, it was revealed that external debt stock (EXD) is positively and insignificantly related to RGDP. It was concluded that the 2005 external debt relief did significantly caused a change in external debt, external debt service relations with economic growth in Nigeria. Based on these findings, the study suggested that external finance should be used only for projects of highest priority. Spending of external debt on productive self-liquidating investments must be strictly adhered to while projects to be financed with external loan must be properly appraised.

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