Effect of External Borrowing and Foreign Aid on Economic Growth in Nigeria

Ugochukwu Sebastine Ugwuegbe · I.G. Okafor · Christian Azino Akarogbe

25 citations0/0 files storedInternational Journal of Academic Research in Business and Social Sciences

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International Development and Aid Monetary Policy and Economic Impact Fiscal Policies and Political Economy

Abstract

This study however, examines the effect of external borrowing and foreign financial aid (foreign grant) in the form of official development assistance (ODA) on the growth of the Nigerian economy over a period of 34 years from 1980 to 2013.Annual time series data was obtained from the Central Bank of Nigeria (CBN) statistical bulletin and Organisation for Economic Cooperation and Development (OECD's online).The study employed Ordinary Least Square technique (OLS) multiple regression model in determining the causal-effect between the variables under study.The test for Unit Root was conducted using Augmented Dickey-Fuller (ADF), Johansen Co-integration test was used to determine the long-runn relationship between the variables and Error Correction Method (ECM) was adopted to help us determine the speed of adjust.The results show that while external debt has a positive and significant effect on economic growth, foreign aid in conformity with the a priori expectation is positively related to GDP as well but statistically insignificant.This implies that foreign aid is beneficial to Nigeria but has not been much felt.Hence bulk of such funds (foreign aid) are been channelled to meeting recurrent or consumption expenditure needs of the country at the expense of productive investments.

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References

1988Statistical analysis of cointegration vectors 1990MAXIMUM LIKELIHOOD ESTIMATION AND INFERENCE ON COINTEGRATION — WITH APPLICATIONS TO THE DEMAND FOR MONEY n.d.Aid, Policies, and Growth 2002Do Corrupt Governments Receive Less Foreign Aid?2002External Debt and Growth 1991Statistical Analysis of Cointegration Vectors 1999Aid, Policies, and Growth 2005Evaluating the impact of foreign aid on economic growth: a cross-country study

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