IDEAS home Printed from https://ideas.repec.org/a/gam/jecomi/v12y2024i6p142-d1410102.html
   My bibliography  Save this article

The Effects of External Debt and Foreign Direct Investment on Economic Growth in Nigeria

Author

Listed:
  • Gbenga Wilfred Akinola

    (School of Economics, College of Business and Economics, University of Johannesburg, Johannesburg 2006, South Africa)

  • Abieyuwa Ohonba

    (School of Economics, College of Business and Economics, University of Johannesburg, Johannesburg 2006, South Africa)

Abstract

Economic theory argues that foreign direct investment (FDI) and external debt are expected to enhance economic growth in any given economy. Consequently, this study (i) investigated the relationship between foreign direct investment, external debt servicing, and economic growth in Nigeria; (ii) investigated how foreign direct investment and external debt impact Nigeria’s economic growth; and (iii) analyzed the direction of causality among the three macroeconomic variables. Descriptive statistics, time series autoregressive distributive lag, and robust Granger causality tests were adopted as the estimating techniques. The results showed that from 2011 to 2022, Nigeria’s FDI continued to decline, Nigeria’s external debt servicing continued to grow on an upward trajectory, and the growth of the GDP has been meandering. ARDL analysis results confirmed that the lag of FDI and current exchange rate exert positive effects on current economic growth in Nigeria, with a 1% increase in FDI, current external debt, and current exchange rate increasing growth by 1.49%, 1.58%, and 0.02%, respectively. Results from the Granger causality showed that FDI and external debt do Granger cause GDP in Nigeria. Policymakers should focus on prudent debt management practices and strive to reduce domestic debt levels.

Suggested Citation

  • Gbenga Wilfred Akinola & Abieyuwa Ohonba, 2024. "The Effects of External Debt and Foreign Direct Investment on Economic Growth in Nigeria," Economies, MDPI, vol. 12(6), pages 1-23, June.
    • Handle: RePEc:gam:jecomi:v:12:y:2024:i:6:p:142-:d:1410102
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2227-7099/12/6/142/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/2227-7099/12/6/142/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-959, December.
    2. Viral Pandya & Sommala Sisombat, 2017. "Impacts of Foreign Direct Investment on Economic Growth: Empirical Evidence from Australian Economy," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(5), pages 121-131, May.
    3. Journal of Economics Library, 2017. "New Economics Books," Journal of Economics Library, KSP Journals, vol. 4(3), pages 404-450, September.
    4. World Bank, 2021. "Global Economic Prospects, January 2021," World Bank Publications - Books, The World Bank Group, number 34710.
    5. Ben Obi & Gobna Obida Wafure & Auta Elisha Menson, 2012. "Savings, Investment and Economic Growth in Nigeria: An Empirical Analysis," The IUP Journal of Monetary Economics, IUP Publications, vol. 0(1), pages 16-38, February.
    6. Paul Terhemba Iorember & Solomon Gbaka & Gylych Jelilov & Nargiza Alymkulova & Ojonugwa Usman, 2022. "Impact of international trade, energy consumption and income on environmental degradation in Africa's OPEC member countries," African Development Review, African Development Bank, vol. 34(2), pages 175-187, June.
    7. Journal of Economics Library, 2017. "New Economics Books," Journal of Economics Library, KSP Journals, vol. 4(4), pages 574-620, December.
    8. Journal of Economics Library, 2017. "New Economics Books," Journal of Economics Library, KSP Journals, vol. 4(2), pages 241-287, June.
    9. Grossman, Gene M. & Helpman, Elhanan, 1991. "Trade, knowledge spillovers, and growth," European Economic Review, Elsevier, vol. 35(2-3), pages 517-526, April.
    10. Luiz de Mello, 1997. "Foreign direct investment in developing countries and growth: A selective survey," Journal of Development Studies, Taylor & Francis Journals, vol. 34(1), pages 1-34.
    11. World Bank, 2021. "Global Economic Prospects, June 2021," World Bank Publications - Books, The World Bank Group, number 35647.
    12. Journal of Economics Library, 2017. "New Economics Books," Journal of Economics Library, KSP Journals, vol. 4(1), pages 83-129, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. John Komlos, 2021. "Macroeconomic Inequality from Reagan to Trump. Market Power, Wage Repression, Asset Price Inflation, and Industrial Decline," The Economic Record, The Economic Society of Australia, vol. 97(318), pages 450-453, September.
    2. Juan Grigera, 2022. "Adding Insult to Injury: The COVID‐19 Crisis Strikes Latin America," Development and Change, International Institute of Social Studies, vol. 53(6), pages 1335-1361, November.
    3. Zoltan J. Acs & Saul Estrin & Tomasz Mickiewicz & László Szerb, 2018. "Entrepreneurship, institutional economics, and economic growth: an ecosystem perspective," Small Business Economics, Springer, vol. 51(2), pages 501-514, August.
    4. Edward L. Glaeser, 2020. "Urbanization and its Discontents," NBER Working Papers 26839, National Bureau of Economic Research, Inc.
    5. Giampaolo Bonomi & Nicola Gennaioli & Guido Tabellini, 2021. "Identity, Beliefs, and Political Conflict," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 136(4), pages 2371-2411.
    6. Muhammad Zeeshan Younas & Rashid Mehmood, 2018. "Examining the Efficiency of American Stock Exchange NASDAQ: An empirical analysis of the Market Efficiency Hypothesis," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 7(3), pages 132-137, September.
    7. Vasiliki A. Basdekidou & Artemis A. Styliadou, 2017. "Corporate Social Responsibility Performance & ETF Historical Market Volatility," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(10), pages 30-39, October.
    8. Waithaka, Douglas Mwangi & Kendzia, Michael Jan, 2024. "Impact of Stock Market Manias and Panics on the U.S. Labor Market," IZA Discussion Papers 17276, Institute of Labor Economics (IZA).
    9. Bista, Raghu, 2019. "Future Connectivity Chinese One Belt, One Road: Prospects and Implications to Nepal," MPRA Paper 100068, University Library of Munich, Germany, revised 05 Dec 2019.
    10. repec:prg:jnlpep:v:preprint:id:646:p:1-21 is not listed on IDEAS
    11. John Komlos, 2018. "Reaganomics: A Historical Watershed," CESifo Working Paper Series 7301, CESifo.
    12. Mirzabaev, Alisher, 2021. "Impacts of Extreme Weather Events Under Changing Climate on Household Consumption and Assets Inequality in Uganda," 2021 Conference, August 17-31, 2021, Virtual 315872, International Association of Agricultural Economists.
    13. Victor H Mlambo, 2018. "Cross-border Migration in the Southern African Development Community (SADC): Benefits, Problems and Future prospects," Journal of Social and Development Sciences, AMH International, vol. 8(4), pages 42-56.
    14. Charles M. A. Clark, 2020. "Editor’s Introduction: Catholic Social Thought and Work," American Journal of Economics and Sociology, Wiley Blackwell, vol. 79(4), pages 1073-1084, September.
    15. Komlos John, 2019. "Reaganomics: A Watershed Moment on the Road to Trumpism," The Economists' Voice, De Gruyter, vol. 16(1), pages 1-21, December.
    16. Andreas Hendricks & Peter Lacoere & Erwin van der Krabben & Cynthia Oorschot, 2021. "Limits of Negotiable Developer Obligations," Sustainability, MDPI, vol. 13(20), pages 1-20, October.
    17. Usenata, Nnyeneime, 2022. "Does corruption cause income inequality and long-run poverty?(Evidence from Nigeria)," MPRA Paper 113588, University Library of Munich, Germany.
    18. Dirk Schoenmaker & Willem Schramade, 2019. "Investing for long-term value creation," Journal of Sustainable Finance & Investment, Taylor & Francis Journals, vol. 9(4), pages 356-377, October.
    19. Anna Y. Veretennikova & Daria A. Selezneva, 2023. "Development of Regulatory Strategies in the Sharing Economy: The Application of Game Theory," Economies, MDPI, vol. 11(12), pages 1-18, December.
    20. Williams, Gary W. & Capps Jr., Oral, 2020. "Generic promotion of Norwegian seafood exports," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association, vol. 23(3), August.
    21. Saima Husain & Amber G. Rashid, 2018. "Exploring brand symbolism amongst 10 year-old urban Pakistani children," Business Review, School of Economics and Social Sciences, IBA Karachi, vol. 13(2), pages 117-131, July-Dece.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jecomi:v:12:y:2024:i:6:p:142-:d:1410102. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.