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INTERDISCIPLINARY JOURNAL OF CONTEMPORARY RESEARCH IN BUSINESS
JUNE 2011
VOL 3, NO 2
THE IMPACT OF EXTERNAL DEBT BURDEN ON THE GROWTH OF
AGRICULTURAL AND MANUFACTURING SECTORS IN THE
NIGERIAN ECONOMY (1980 – 2008)
Okosodo, L. A.
Department of Economics, Ambrose Alli University,
Ekpoma, Nigeria
ISEDU, M.O.
Department of Economics, Ambrose Alli University,
Ekpoma, Nigeria.
Abstract
This paper investigates the impact of external debt burden on the growth of agricultural and
manufacturing sectors of the Nigerian economy. The main objective of this study is to examine
the impact of external debt burden on the growth of agricultural and manufacturing sectors of the
Nigerian economy. The external debt of Nigeria is analyzed using error correction mechanism
(ECM). The study used annual time series data from 1980 – 2009,the result of the econometric
analysis revealed that external debt contributes inversely to the growth of agricultural and
manufacturing sectors of the Nigerian economy up to a point after which its contribution
becomes positive. The use of externally borrowed funds for government projects must be closely
monitored in order to ensure that they are applied efficiently and effectively.
Keywords: Impact; External Debt Burden ; Growth ; Agricultural ; Manufacturing Sectors ;
Nigerian Economy
INTRODUCTION
Over the past two decades, external debt and capital flight have come to symbolize the two faces
of the same coin in the development debacle. In many developing countries, these two
phenomena have grown unabated, with the cumulative stock of capital flight markedly exceeding
the stock of external debt especially in Nigeria (Ndikumana and Boyce, 2008). While the
dramatic increase in external debt is to a certain extent understandable, especially given the
recurrence of balance of payments crisis and external disequilibrium in the majority of lowincome
countries, the sustained increases of capital flight – the voluntary exist of private
residents’ owned capital either for safe haven or for investment made in foreign currency – is
less obvious, in part because the majority of the countries confronted with massive outflows of
resources are also highly capital scarce.
All countries regard economic growth and development as their primary objective,this
objective embraces the need to raise the income, economic capabilities and the standards of
living of their peoples. To attain this objective, there must be a rise in national or per-capita
income and product, in other words a rise in the production of goods and services in a country
(Itesede, 2005). The goods and services so produced must be channeled to satisfy the basic needs
of the people, otherwise development would not occur. Nevertheless, since the scale of
production can only be increased in the long run, economic growth is considered a long run
phenomenon (Kibritcioglu and Dibooglu, 2001). External debt is the debt incurred by
government through the borrowing from international finance to support low productivity and
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