External Debt, Economic Growth and Investment in Nigeria

This study examines the impact of external debt on the level of economic growth and the volume of investment in Nigeria between 1980 and 2008. We adopt the Debt Cum-Growth model along with the Investment model while the econometrics analysis techniques of multiple regressions were employed. The result of the analysis indicates that there exists a positive relationship between external debt, economic growth and Investment; this was confirmed by the coefficient of determination (R2­) of about 79.8% .While the findings reveal that the current external debt ratio of GDP stimulates growth in the short term, the Private Investment which is measure of real and tangible development shows a decline. The study recommends among others that government should ensure that appropriate measures are put in place to achieve optimal use of borrowed funds so that servicing such funds will not invoke economic crises and erode the level of private investment which is central to the overall economic growth and development. KEYWORDS: Debt overhang, debt rescheduling, debt burden, Investment, Consumption, Illiquidit