ABSTRACT

This study examined effect ofdebt servicing on economic growth in Nigeria within the sample period of1981-2017. The objective ofthe study was to very how debt servicing has affected the economy. The datafor this research work was obtainedfrom the CBNStatistical Bulletin (2017) and analysed using ordinary least squares (OLS) technique. Real Gross Domestic Product was regressed against External Debt, debt service payment, interest rate and gross fixed capital formation. Certain econometrics tests were conducted such as Unit Root test, Johansen cointegrating equation and error correction model. The unit root test indicates that all the variables were stationary atfirst differencing. The cointegration resultrevealed that the is a long run relationship among the variables employedfor the study. The error correction mechanism result shows that debt servicingpayment had negative effect on real gross domestic product that the variable was statistically significant, exchange rate, external debt and gross fixed capital formationpositive andstatistically significant. Interest rate was positive but notsignificant. Also, the R2was 0.97, showedthat 97% of the changesin GDPwas caused by changes in the explanatory variables. Thef-statistics was statistically significant meaning that the explanatory variables had joint influence on GDP, The Breusch-Godfrey Serial Correlation LMtestshow that the model was free from autocorrelation. Based on this finding the research recommends among others; Government should incorporate debt management that will constitute an integral part of our overall developmentstrategy especially in the light ofthe country’s adverse balance ofpayments problems.