IMPACT OF EXTERNAL DEBT ON ECONOMIC GROWTH IN SELECTED SUB- SAHARA AFRICAN COUNTRIES

ABSTRACT

This study investigated the impact of external debt on economic growth in selected Sub-Sahara African Countries using time series data from 1986 to 2020. The countries selected for the study include Angola, Cameroon, Kenya and Nigeria. The specific objectives include: to investigate the impact of external debt stock on economic growth; to evaluate the impact of external debt servicing on economic growth; to investigate the impact of inflation on economic growth; and to examine the impact of exchange rate on economic growth. Solow Growth model formed the theoretical basis for this study. Longitudinal research design was adopted. External debt stock, external debt service, inflation rate and exchange served as the independent variables while real gross domestic product served as the dependent variables. Data were sourced on these variables from the Central Bank of Nigeria Statistical Bulletin, 2020 and World Development Indicators. Descriptive statistics, Augmented Dickey Fuller unit root test, Johansen Cointegration Test and Error Correction Mechanism (ECM) were employed in analyzing the data. The result of the descriptive statistics indicates that all the variables are normally distributed. Augmented Dickey- Fuller (ADF) test statistics showed that all the variables used in this study were stationary at first difference. The results of the Johansen Cointegration Tests indicate that there is a long run relationship between dependent and the explanatory variables in each of the models. The results of the estimation techniques indicate that external debt stock has significant impact on economic growth; external debt servicing has significant impact on economic growth; inflation has significant impact on economic growth; and exchange rate has no significant impact on economic growth in Angola, Cameroon, Kenya and Nigeria. The study concluded that external debts have significant impact on economic growth in selected Sub-Sahara African Countries. The study recommends that amongst others that government should direct the borrowed funds to the diversification of the productive base of the economy to improve long-term economic growth, expand the revenue base and strengthen the capacity to repay outstanding debts when due.