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Impact of External Debt on Nigeria’s Foreign Reserve Portfolios

Author

Listed:
  • Peter E. Ayunku
  • Dumani Markjackson

Abstract

This study examines the impact of external debt and external debt servicing on the international reserves of Nigeria. The theoretical underpinning of the study was anchored on dual gap theory and the self-insurance theory of external reserves. The after effect research design was adopted to examine the components of the study in retrospect. Historical data spanning 1981 to 2018 was collated from the World Development indicators and analyzed using the error correction mechanism as the unit of analyses and estimated employing the least square technique. The empirical findings indicate that external debt stock exert a negative and statistically significant impact on Nigeria’s foreign exchange reserve portfolios. It further emerged that external debt service payments exert a positive but statistically insignificant impact on the international reserves of Nigeria. The study concludes that external debt stock and external debt service payments has no significant impact on the international reserve portfolios of Nigeria. The study recommends that, the fiscal managers of Nigeria should exercise cushion in external borrowing in order to ensure that concomitant external debt service payments does not deplete the international reserves of the country.

Suggested Citation

  • Peter E. Ayunku & Dumani Markjackson, 2020. "Impact of External Debt on Nigeria’s Foreign Reserve Portfolios," Asian Journal of Economics and Empirical Research, Asian Online Journal Publishing Group, vol. 7(1), pages 1-7.
    • Handle: RePEc:aoj:ajeaer:v:7:y:2020:i:1:p:1-7:id:1274
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    Cited by:

    1. Adamgbo, Suka & Kenn-Ndubuisi, Juliet Ifechi & Toby, J. Adolphus, 2021. "Rising External Debt Burden, Increase Financial Stability Risk; the Need for Fiscal Adjustment in Nigeria," Noble International Journal of Economics and Financial Research, Noble Academic Publsiher, vol. 6(2), pages 33-43, February.
    2. Sani Usman Gurowa & Shamaki Mohammed & Mohammed Ola Maroof, 2023. "Nexus Between Public Debt Servicing and Social and Community Sector Spending in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 7(8), pages 457-466, August.

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